While some investors chose to shun Coveo’s initial public offering, judging in particular its valuation too high, others jumped at the opportunity knowing full well that the title of the Quebec company specializing in artificial intelligence applied to online commerce was not cheap.
“It’s not a godsend,” says investor Voicu Valentir. “But because of the scarcity of new shareholders getting only 13.7% of Coveo’s shares in the deal, there is upside potential. ”
“I only had peanuts “, He adds, specifying that he obtained only 10% of his order placed through his broker in anticipation of the IPO.
The initial valuation of the share seems to have been calculated rather well by the bankers, according to this professional market operator and president of the Cavaliro Group.
The involvement of several American brokers (BofA, UBS, Oppenheimer and Ramirez & Co) in the management of this initial public offering is in particular what caught the attention of Voicu Valentir. “It really helps a tech company that wants to go public,” he says.
“Coveo is a business that is growing well although it is not extraordinary, but I saw from the start of the roadshow that it was very hot. Not all brokers had access to the book, which was already a good signal in itself, ”he says. “From the first days of the roadshow, it was sold well. ”
“Too expensive,” says Stephen Takacsy, chief investment officer at Lester Asset Management in Montreal. This manager says he passed his turn, judging the valuation multiple on sales too high.
Portfolio manager Eric Gibouleau, of the Montreal firm Dorchester Asset Management, also preferred to abstain. “We did not participate in the Coveo IPO. Super nice company, but the valuation was too high for us, ”he says.
First session
Coveo saw its stock appreciate 8% Thursday in its very first trading session on the Toronto Stock Exchange. The stock closed at $ 16.20 after its initial price was set at $ 15 the day before by the company’s bankers following presentations and meetings with investors in recent weeks.
Coveo’s initial share price was set at the high end of the previously established $ 13 to $ 15 range to give investors an indication of the value sought in its initial public offering.
The initial public offering allows Coveo to raise 215 million. This money should be used to strengthen the financial position of the company and help it pursue its growth strategy.
According to our information, the share issue was substantially oversubscribed with more than $ 1 billion in orders from investors wishing to become shareholders of Coveo.
The principal shareholders of Coveo are its directors, the Fonds de solidarité FTQ, Investissement Québec, Omers (the pension fund for municipal employees in Ontario) as well as the Evergreen funds (a subsidiary of Elliott Management) and Qatar Investment Authority.
It was not possible to speak to Coveo executives on Thursday for comment. “We are still in a quiet period. We cannot speak to the media, ”said spokesperson Sheila Morin.
Coveo’s revenue, which has a significant portion of recurring revenue, exceeded US $ 64 million in its most recent fiscal year.
The turnover is up compared to its level of 44 million US in 2019 and 55.5 million US in 2020.
A net profit of US $ 11 million was generated for the six-month period ended at the end of September. The gross margin of the activities is between 75% and 80%.
Management estimates the size of its potential market at nearly $ 39 billion.
Coveo was founded in 2005 by Laurent Simoneau, now President and Chief Technology Officer, Marc Sanfaçon (Senior Vice-President, Technology) and Richard Tessier (Senior Vice-President, Products).
The company is managed by Louis Têtu, who first joined the company in 2008 as an investor and member of the board of directors. He became CEO in 2012. The company’s workforce is approximately 750 employees.