/Posthaste: GFL is latest wounded unicorn — and why a great company might not be a great stock

Posthaste: GFL is latest wounded unicorn — and why a great company might not be a great stock

Good Morning!

Another initial public offering has floundered in the face of investor skepticism. Waste management company GFL Environmental Inc. said it was cancelling its IPO after investors balked at the proposed valuation of the heavily-indebted company. GFL was looking to raise around $2.1 billion.

It would have been the biggest IPO in Canada since Petro-Canada’s privatisation back in 2004, which raised around $3.2 billion.

Although investors are scrambling for returns amid frothy markets, a number of IPOs such as WeWorks have failed to materialise, while others such as Uber Inc. and Beyond Meat have struggled since their market debuts due to a combination of weak business models and excessive valuations.

“What is the main issue underlying the recent troubles?,” Richard GMP analysts Chris Kerlow, Derek Benedet, Craig Basinger and Alexander Tjiang said in a recent note, titled Wounded Unicorns.

“Pricing might be at the root of the problem. That is, deal pricing might be more art than science, no matter what bankers may say. It’s a delicate process to determine what the market is willing to pay. Important elements include: the assessment of management quality; business quality; level of interest (some say ‘greed’)in the market; valuation of comparable companies; and ultimately the founder’s ideal asking price,” the analysts said.

The run up of new IPOs earlier this year and subsequent underperformance is another example of how fast sentiment and investor behavior can pivot, wrote GMP analysts. “Humans are all prone to a variety of biases and heuristics; the key is to control your emotions and not get caught in the fear of missing out. Faux meat and ride sharing are innovative technological disruptors, but even a great company might not be a great stock.”

Other companies are taking the private route. Oilsands company Pengrowth Energy Corp. chose to sell itself privately to Cona Resources, while pharma chain Walgreens is exploring going private in what’s reportedly the biggest leveraged buyout ever.

Another wounded unicorn may be Saudi Aramco. The mega IPO is driven more by political considerations rather than valuations.

Here’s what you need to know this morning:

TSX futures tread water, eye trade developments


  • Prime Minister Justin Trudeau will meet with meet with Richard E. Neal, Chairman of the Committee on Ways and Means of the United States House of Representatives, along with Foreign Affairs Minister Chrystia Freeland in Ottawa
  • Ontario Finance Minister Rod Phillips introduces the legislature of the 2019 Ontario Economic Outlook and Fiscal Review in Toronto
  • Residential Mortgage Industry Report – quarterly data from CMHC at 8:30 AM ET
  • Future of Alberta’s electricity system is topic of energy symposium held by the Centre of Applied Business Research in Energy and the Environment at the University of Alberta in Calgary
  • Clean Energy Conference featuring First Nations in Vancouver
  • Notable Earnings: WSP Global, CGI Group Inc., Osisko Gold Royalties Ltd, Intact Financial Corp., Equitable Group Inc., Barrick Gold, Spin Mater, Iamgold Corp., TeraGo, Keyera Corp., SSR Mining Inc., B2Gold Corp., Western Forest Products Inc.

Toronto’s housing market continued to bounce higher in October, with prices rising the most in almost two years amid dwindling supply.

The benchmark price, which accounts for differences in the type of homes sold, rose 5.8 per cent from a year ago to $810,900, the Toronto Real Estate Board said in a report Tuesday. That’s the biggest jump since December 2017 and takes it to within about $4,300 of the record set in mid-2017, according to a Bloomberg report.


— Please send your news, comments and stories to [email protected]. — Yadullah Hussain @yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg


Original Source