The maker of C$900 parkas priced its IPO above the marketing range on Wednesday, underscoring strong investor appetite for a brand that celebrities have made popular.
Portfolio Management Corp Managing Director Norman Levine said the surge in Canada Goose shares did not surprise him, but he wondered whether they would remain at that level.
“The history of new issues is not good in Canada,” he said.
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Canada Goose’s fur-laced jackets and hoods are sold in 36 countries around the world, but about 68 percent of the Toronto-based company’s 2016 revenue came from Canada and United States.
“There is opportunity in everything,” Chief Executive Dani Reiss said. “[Canada Goose] has tremendous geographical opportunities,” including in Europe and in Asia, he said.
Founded in a small Toronto warehouse 60 years ago, Canada Goose was acquired by private equity firm Bain Capital in 2013. The company sold 20 million shares at C$17.00 each after pitching them to investors at C$14 to C$16.
Part of the proceeds of the IPO, which valued the company at about C$1.8 billion, will go to paying down debt.
By afternoon, the Toronto-listed shares were up 28.5 percent at C$21.85 after rising as high as C$23.98. The benchmark Canadian stock index was up 0.4 percent. Some 6.1 million shares of Canada Goose had traded, making it the second-most active stock on the exchange.
Thursday’s strong gains made the stock relatively expensive. At the day’s high of C$23.98, Canada Goose was trading at 68.5 times its 2016 profit of 35 Canadian cents per share, as calculated by Reuters. Luxury retailer Hermes International, by comparison, had a price-to-earnings ratio of 43.6.
“The market is forecasting significant growth in earnings going forward,” said Cavan Yie, senior equity analyst at Manulife Asset Management.
Avenue Investment Management portfolio manager Bryden Teich, who did not participate in the IPO, was cautious about the company’s growth prospects.
“It is a very niche product at the high end of the retail market, and the retail market is under pressure overall,” Teich said. “In light of an over-indebted Canadian consumer, a really tough retail environment, I have a hard time seeing how it becomes a big growth story.”
(Source: Fashion Network)