VerticalScope increased the size of the offering on Monday after a wave of investor interest catapulted the deal to ‘multiple oversubscriptions’
Shares of VerticalScope Inc. made their public debut on the Toronto Stock Exchange on Tuesday after increasing its offering by 25 percent to $ 125 million the day before.
The Toronto-based company’s initial public offering is the latest in a parade of Canadian tech companies launching into public markets. Increased the size of the deal to $ 125 million from $ 100 million after garnering strong demand from investors.
VerticalScope is listed on the Toronto Stock Exchange under the ticket symbol FORA at $ 22 per share. Initially, the company had planned to price the offering between $ 19 and $ 23. The stock closed on its first day of trading at $ 22.95, down 9 percent from its opening price of $ 25.25.
The company decided to increase the size of the offering on Monday after a wave of investor interest catapulted the deal to “a lot of oversubscriptions,” CEO Rob Laidlaw said in an interview.
“We had a significant amount of investor interest in our business,” Laidlaw said. “We have a very strong M&A portfolio and we thought we could put that money to work and generate returns for shareholders.”
The deal values the stake of NordStar Capital LP, one of its largest shareholders, at $ 173 million. NordStar bought Torstar Corp. in a $ 60 million acquisition last year, and its stake nearly tripled with the IPO.
RBC Dominion Securities Inc., Canaccord Genuity Corp. and National Bank Financial Inc. led the IPO, which also included TD Securities Inc., Raymond James Ltd., Desjardins Securities Inc., Cormark Securities Inc. and HSBC Securities Inc.
We had a significant amount of investor interest in our business.
The company, founded by Laidlaw in 1999, is home to more than 1,200 enthusiast community websites on topics including guitars, woodworking, beekeeping, dogs, DIY projects, and boating, with more than 100 million monthly users.
With $ 100 million earmarked for the 20 potential acquisitions in its portfolio over the next year, VerticalScope expects to add $ 18 million in adjusted earnings before income, taxes, depreciation and amortization (EBITDA) collectively. The company posted US $ 26.6 million in Adjusted EBITDA in 2020, a five percent increase from 2019.
In its 22-year history, the company has made more than 200 acquisitions. In 2018 and 2019 alone, it spent $ 50.1 million on 25 acquisitions, including Yellow Pages’ RedFlagDeals, before heavily pausing its acquisition strategy last year to focus on updating its cloud-based software and migrating its communities. online to the new platform.
When search engines prioritized online forums with more modern user experiences in 2018, VerticalScope’s websites relied on multiple legacy platforms, making it difficult to adapt, the company said in its prospectus. Its search ranking “dropped significantly,” its usual number of users plummeted, and its revenue plunged 14% year-over-year in 2019.
Since then, it began transitioning its communities to its cloud-based platform, migrating 88 percent of its forums as of March 31. In the past twelve months, revenue increased 11 percent.
With the funds raised from the IPO, Laidlaw is looking back at his acquisition strategy.
“It was not an easy decision, because we had to step back from monetization because we were facing traffic headwinds,” Laidlaw said, adding that the company reduced ads to make its sites faster for users. “It has been an improved material for our business and now we are growing again.”