An online car-selling company controlled by the merchant bank that took Docebo Inc. public two years ago has set the price range for its initial public offering on the Toronto Stock Exchange.
E Automotive Inc., an acquisitive, fast-growing digital automobile auction platform for dealers, based in Toronto, said in a securities filing Wednesday it intends to raise $125-million selling shares at $19 to $23 apiece. The company filed to go public on Monday but only disclosed the size and price range in its amended prospectus on Wednesday.
Based on information in the filing, E Automotive, which operates as E Inc., is targeting a market capitalization of between $866-million and $1.02-billion at issue. The offering is being 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.
E Inc. is controlled by Toronto merchant bank Intercap Equity Inc., which invested four years ago. Intercap owns 26.2 million shares, about two-thirds of the company’s pre-IPO equity, which gives it the right to appoint a majority of directors as long as its stake exceeds 50 per cent of the equity (it can still appoint a set share of the board, based on a sliding scale, as its holdings decrease). Four of E Inc.’s eight directors are Intercap appointees, including Jason Chapnik, the chief executive officer of the merchant bank, who chairs E Inc.
Intercap turned a $33-million investment in Docebo Inc. – a provider of online employee training software – in 2014 into a $1.5-billion gain after the company’s IPO in October, 2019. Docebo went public on the TSX at $16 a share and the stock now trades at close to $100. Intercap has sold close to $260-million worth of Docebo stock since then but still has 13.6 million shares, worth roughly $1.3-billion on paper.
E Inc. has mushroomed in size in part from three acquisitions in the past year, and through a shift to online commerce during the COVID-19 pandemic. Demand for used vehicles has been helped by government stimulus cheques to individuals and a global chip shortage that has hampered availability of new vehicles. E Inc. is making a big push to expand in the United States, in part through more acquisitions.
The money-losing company generated revenue of US$37.2-million in the first half of this year, more than triple the amount in the same period a year earlier. E Inc. generates US$362 in fees per vehicle sold through its wholesale platform, and it has more than 1,000 dealer customers who pay US$609 a month to subscribe for additional features. The platform handled 115,000 transactions in the 12 months ended June 30. The total gross value of transactions on the platform in the first half of 2021 was US$949-million, up nearly fourfold year over year.
One of the offering’s selling features is the track record of the team behind E Inc. Mr. Chapnik once chaired Dealer.com, which sold online tools for automobile dealerships. It was bought in 2014 by Nasdaq-listed Dealertrack Technologies in a deal valuing Dealer.com at US$1.1-billion. He joined the board of Dealertrack, a web-based software provider to the auto industry; Dealertrack was sold to Cox Automotive in 2016 for US$4.5-billion.
In its prospectus, E Inc. notes three of its C-suite executives 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 similar success to E Inc.,” the prospectus states.
E Inc. comes to market during a busy fall for Canadian tech IPOs on the TSX. Copperleaf Technologies Inc., a Vancouver decision analytics software maker, soared in its debut this month. Financial technology provider Propel Holdings Inc. of Toronto traded up from its $9.75-per-share issue price when its stock began trading Wednesday. Toronto-based investor relations software provider Q4 Inc. is expected to price its $150-million offering this week, and Kitchener, Ont.-based online learning software seller D2L Corp. is now marketing its proposed $200-million public offering. Montreal-based online advertising exchange Sharethrough Inc. also filed to go public this month.
The spate of activity continues a record run of new issues. In the past 16 months, 16 Canadian tech companies have gone public on the TSX. By comparison, there were just 12 IPOs in the 11 years ended December, 2019.
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Sean Silcoff