Coveo Solutions Inc. is expected to set its $ 215 million initial public offering at the high end of its proposed range of $ 13-15 per share after receiving more than $ 1 billion in investor contracts -Dollars received, according to two sources. It’s a strong result for a new Canadian tech issue on the Toronto Stock Exchange after a string of dis -pointing efforts by Canadian tech companies listed this fall.
The board of directors of the Quebec City-based corporate software company, led by serial entrepreneur Louis Têtu, will decide on Wednesday evening, on the recommendation of the company and its advisors, to price the offer at $ 15 per subordinated voting share, giving the company a value of around 1.7 Billion dollars in question. The offering is jointly led by BMO Nesbitt Burns, Merrill Lynch Canada, RBC Dominion Securities and UBS Securities. The underwriting team also includes Canaccord Genuity, National Bank Financial, Scotia C -ital and TD Securities.
The Globe and Mail withholds the identity of the sources as they have no authority to publicly discuss the matter. Coveo filed for an IPO and announced the price range and deal size this month. Coveo stock is scheduled to trade under the symbol CVO on Thursday.
It’s been a staggering drop in Canadian tech IPOs on the TSX. Three of the last four tech companies that went public on Canada’s Senior Exchange this fall – D2L Corp., E Automotive Inc., and Q4 Inc. – subsequently traded below their issue prices. Montreal-based online advertising company Sharethrough delayed its IPO plans this month in response to poor market reception for Canadian technology IPOs.
Coveo will be the 20th Canadian technology IPO on the TSX, raising $ 50 million or more as of July 2020. In contrast, in the 11 years ended December 2019, there were 12 Canadian technology IPOs on the TSX. Despite a record year for the public and private fundraising by Canadian tech companies, the public markets have lagged the overall market on new issues from the pandemic era.
Coveo sells artificial intelligence-based technology known as Insight Engines to more than 475 customers, including BlackBerry, Salesforce, Lee Valley, BRP and Xero, who have the same personalized, relevant search results on their websites as Coveo’s Google or Amazon.
The market research companies Forrester and Gartner rank Coveo alongside the French Sinequa SAS as one of the global industry leaders. Coveo paid $ 42.9 million last month for London-based Qubit Digital, which offers software used by retailers and consumer product companies like Kate Spade, LVMH, and Estée Lauder to provide personalized product recommendations and customer insights on their e- Commerce Sites Collect.
The major outside shareholders in the 625-strong company are US investment giant Elliott Management Corp., the employee-funded Fonds de solidarité FTQ, the Quebec government’s Investissement Québec, the Qatar Investment Authority and Ontario Municipal Employees Retirement System.
57-year-old Mr. Têtu invested in Coveo in 2008, four years after it was founded. He joined Oracle in 2012 as chief executive officer at the request of co-founder, president and chief technology officer Laurent Simoneau, the same year that Mr. was bought.
Mr. Têtu was assisted by Jean Lavigueur, Chief Financial Officer, and Chief Operating Officer Guy Gauvin, who worked with him in several previous companies until 1990.
Coveo was the latest in a line of IPO-linked Canadian software companies to offer a relatively smooth combination of top-line growth and operating profitability, which according to some market watchers The Globe and Mail dampened demand for earlier offerings.
Coveo posted sales of $ 37.7 million for the six months ended September 30, up 23.1 percent over the same period last year. The company’s revenue rose 16.9 percent for the last full fiscal year ended March 31, 2021 and 25.1 percent the year before. Meanwhile, it posted operating losses of 37.4 percent of sales, 31.7 percent and 25.7 percent, respectively, for the respective periods. About 85 percent of its business is done in the United States.
Even so, one of the sources said investors responded well to Coveo’s seasoned management team and the fact that Coveo draws its subscription income from large, stable companies, mostly through contracts that run for three or more years. Additionally, the company has a net expansion rate of 113 percent, which means that it manages to successfully grow sales by increasing contract sizes with existing customers.
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