Online auto dealer E Automotive Inc. is set to debut on the Toronto Stock Exchange on Wednesday after increasing the size of its IPO and placing the deal at the high end of its proposed range of offerings being marketed to investors.
The company announced late Tuesday that it would sell 5.9 million shares of common stock at a price of $ 23 each, for gross proceeds of $ 135.7 million. The company announced last month that it would raise shares valued at $ 125 million, initially with a price range of $ 19-23 per share. The offering is led by Canaccord Genuity, CIBC World Markets and National Bank Financial. Other underwriters include Scotia Capital, Eight Capital, ATB Capital Markets and Laurentian Bank Securities. The syndicate banks have the right to purchase an additional 885,000 shares at the offer price within 30 days of the official closing of the transaction on November 10th.
Wednesday will be a busy day for new Canadian technology issues as shares of D2L Corp., which reduced the size and prices of its offering last week, will also start trading. With their two debuts, an unprecedented 19 tech companies will go public on the TSX since July 2020, compared to just 12 in the 11 years ended December 2019. While some of the 17 have increased in value, overall performance has been uneven. Many newly listed Canadian tech companies are now trading well below their issue prices.
E Automotive Inc., an acquiring, fast-growing digital automobile auction platform for dealers based in Toronto, trading as E Inc., is controlled by the Toronto-based commercial bank Intercap Equity Inc., which also listed Docebo Inc. two years ago brought. Intercap, which invested four years ago, owns 26.2 million shares, about two-thirds of the company’s equity prior to going public. This gives her the right to appoint a majority of the directors as long as her stake exceeds 50 percent of the equity (she can still appoint a certain portion of the board in stages if her stake decreases). Four of the eight directors of E Inc. are appointed by Intercap, including Jason Chapnik, the chief executive officer of Merchant Bank, who chairs E Inc.
E Inc. grew in size in part through three acquisitions last year and a shift to online retailing during the COVID-19 pandemic. The demand for used vehicles has been aided by government incentive controls for individuals and a global chip shortage that has hampered the availability of new vehicles. E Inc. is making great efforts to expand in the US, in part through further acquisitions.
The money-losing company had revenue of $ 37.2 million for the first half of this year, more than three times last year. E Inc. generates fees of $ 362 per vehicle sold through its wholesale platform and has 1,000+ dealer customers who pay $ 609 per month to subscribe to additional features. The platform processed 115,000 transactions in the 12 months ended June 30. The total gross value of transactions on the platform was $ 949 million in the first half of 2021, almost four times more than the previous year.
One of the selling points of the offering is the track record of the team behind E Inc. Mr. Chapnik was once the chairman of Dealer.com, which sold online tools for dealerships. It was bought by Nasdaq-listed Dealertrack Technologies in 2014 in a deal that valued Dealer.com at $ 1.1 billion. He joined the board of directors of Dealertrack, a web-based software provider for the auto industry; Dealertrack was sold to Cox Automotive for $ 4.5 billion in 2016.
In its prospectus, E Inc. notes that three of its C-suite executives have worked at Dealer.com and / or Dealertrack, while Dealer.com co-founders Michael Lane and Richard Gibbs serve as directors with Mr. Chapnik. They have “the relationships and experience to provide E Inc. with similar success,” the prospectus states.
E Inc. launches on the TSX during a busy fall for Canadian technology IPOs. Copperleaf Technologies Inc., a decision analytics software company based in Vancouver, made its debut this month. Financial technology provider Propel Holdings Inc. and investor relations software provider Q4 Inc., both from Toronto, went public in the past few weeks. Montreal-based online advertising exchange Sharethrough Inc. also filed for an IPO last month, and Vancouver-based social media management company Hootsuite has had a potential $ 200 million offer with investors over the past few days tested.
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