MID-YEAR ROUND UP: Canada’s Most Influential IPOs To Date in 2014
Canadian investors don’t always get a shot at the hottest IPO’s, but certainly not for lack of trying. CIBC Managing Director Tyler Swan recently told the Financial Post “Investors here are as hungry for technology IPOs and new stories as they are anywhere else in the world.” Fortunately, this year has already brought Canadians opportunities to own or benefit from profitable stocks with more on the way in the coming months.
Founded in 2002 and headquartered in Calgary, Encana is Canada’s largest natural gas producer. The North American energy company also transports and markets natural gas liquids and has a U.S. based subsidiary with 2.6 million acres of land.
During the recent IPO of its PrairieSky Ltd. royalty business, Encana sold 52 million shares at $28 a share, raising $1.46 billion and making it Canada’s largest IPO in fourteen years. PrairieSky Ltd. is designed to collect royalties and fees from other energy companies operating on its land and distributes a large amount to its shareholders.
Encana’s CEO is Doug Suttles, who formerly held leadership positions at Exxon and BP. Amid falling gas prices, Suttles is dedicated to increasing the company’s profit through the sale of assets and zeroing in on properties that produce higher-value oil and gas.
Founded in 1999 and headquartered in Hangzhou, Alibaba began as a business-to-business portal between Chinese manufacturers and overseas buyers. Executive chairman and former English teacher Jack Ma led a team of eighteen to develop their group of e-commerce sites to eventually become responsible for over 60 percent of the parcels delivered in China.
Alibaba’s companies include the Taobao marketplace - an online shopping source that boasts hundreds of millions of products and service listings - and Tmall.com, the largest brands and retail platform in China. Alibaba also has its own third party, fee-free payment system called Alipay that empowers consumers to determine their satisfaction level with products before releasing funds to the seller.
The upcoming IPO, projected to become available in August, is expected to raise as much as $40 billion, making it the largest IPO in the United States to date as well as the biggest tech company IPO worldwide. In its prospectus, Alibaba speculated as to how the IPO might affect its current employees. Alibaba executives and external speakers have been commissioned to proactively discuss successful management strategies for newfound wealth as well as personal development and business goals with their employees.
The Canadian Pension Fund, managing the retirement savings of 18 million people, made a $100 million direct investment in Alibaba in 2011. That investment is expected to yield enormous rewards. Additionally, the Pension Fund reportedly made a $465 million commitment to a fund run by a U.S. private-equity firm that also owns a small share of Alibaba. With current shareholders in China, investors in Canada, and the potential for new shareholders in the United States, the IPO is bound to reap financial benefits internationally.
Financial service provider Markit Ltd., one of the United Kingdom’s fastest growing financial firms, was founded in 2003 and offers over 3,000 institutional customers pricing and reference data, indices and valuation services. Canadian Lance Uggla started the company in London and continues to serve as its CEO.
Their IPO, filed this month, is expected to be valued at $25 to $27 per share. With 4.57 million common shares available, the IPO could value the company at $4.47 billion. Current shareholders include Goldman Sachs, JPMorgan Chase, Deutsche Bank and Bank of America.
As with Alibaba, the Canadian Pension Fund intends to invest $450 million in Markit in order to take a 10 percent stake in the company. This would enable the Pension Fund to appoint a director to Markit’s board as well as expand its range of investments.
Callidus Capital Corporation
Toronto-based Callidus Capital was established in 2003 and is a privately held company specializing in alternative financing solutions for companies that cannot obtain adequate financing from traditional lending institutions. Callidus bases its credit criteria on the value of a company’s assets, enterprise value and borrowing needs. COO David M. Reese has been with the company, which prides itself on its deep understanding of the realities of business, since 2011.
During its April IPO, Callidus raised $252 million from the sale of 18 million shares at $14 each. The company initially hoped to raise $175 million from selling a 35 percent stake with shares priced between $12 and $14. The successful IPO proved to be 44 percent more profitable than projected. The shares closed at $16.25 and have traded in the $16 to $17.15 range.
Montreal’s Lumenpulse is a specialized lighting company that formed in 2006. Lumenpulse has provided lighting solutions for more than 5,000 projects and transformed building standards through the use of energy efficient materials. The company also has regional headquarters in the United States, United Kingdom, and Singapore.
In its April IPO, the company priced 6.25 million shares at $16 each for proceeds of $100 million. Strong demand allowed the underwriters to exercise the over allotment option. The IPO raised $115 million and the stock closed at $18.35 per share. Since going public, the shares have traded in the $18 to $20.50 range.
Lumenpulse chief financial officer Robert Comeau commented on the IPO to Financial Times by saying, “This indicates that there is demand for a company like us that has shown solid growth in the past and wants to continue growing.” With such a profitable IPO, Lumenpulse seems poised for further success.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.