Despite COVID-19, Canadian companies are going public at a blistering pace.Nathan Denette/The Canadian Press
Cross-Canada road shows, long seen as essential for companies looking to raise money, could become something of a rarity even after the COVID-19 pandemic.
For decades, CEOs pitching initial public offerings (IPOs) and other financings climbed on planes with their investment bankers and met with the country’s major institutional investors, touching down in places such as Montreal, Toronto, Winnipeg, Edmonton and Victoria. Many veteran bankers can tell horror stories involving tight schedules and Manitoba blizzards.
While the pandemic put an end to corporate travel, it didn’t slow IPO activity, leading bankers to conclude that in the future, road shows will be largely virtual. While the occasional face-to-face meeting will always be essential for management teams building relationships with investors, BMO Capital Markets managing director Peter Miller said going forward, bankers will market deals using a hybrid system that combines online marketing with the occasional in-person session.
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“From the issuer’s perspective, the management team, this has been a big plus: to be able to sit in your home office or living room and go meet clients in Paris, New York and Los Angeles all in one day, without having to hop on a plane, without worrying about getting stuck in traffic, being able to sleep at night with your husband or wife and have dinner with your kids,” said Mr. Miller, head of BMO’s equity capital markets division.
Before the pandemic, he said he used to average three days a week of business travel. Now he is doing far more business while working remotely. “The efficiency of being able to do video is unbelievable. My productivity has tripled,” he said. “I think the hybrid world is going to be great.”
Despite COVID-19, Canadian companies are going public at a blistering pace. In the first six months of 2021, companies raised a record $6.9-billion in 88 IPOs, according to a survey from CPE Analytics. The debuts included a $1.06-billion offering from Telus International Inc. , the largest technology IPO ever done in Canada, and large share sales by Dentalcorp Holdings Ltd. , MDA Ltd., Softchoice Corp. and Pet Valu Holdings Ltd.
Over all, corporate Canada raised more than $33-billion in equity and fixed-income offerings in the first six months of the year, according to data service provider Revinitiv, which is also a record amount of financing activity.
Bankers found they could reach new investor audiences by making better use of technology. For example, RBC Capital Markets partnered with U.S. investment banks led by Black, Hispanic and female executives, then staged virtual road shows with those dealers to broaden distribution of US$750-million of a green bond offering from Royal Bank of Canada.
Virtual marketing campaigns can play out much faster than a series of in-person meetings across Canada, and that means companies face less market risk when they decide to raise money, said Chris Dale, managing director and head of equity capital markets at National Bank Financial.
By being virtual, “we were able to cover way more territory in way quicker time and you could proceed to close in a faster time frame,” Mr. Dale said.
The U.S. market has also seen record-setting IPO traffic, with US$171-billion of deals in the first half of 2021. Shifting to virtual road shows from traditional, in-person meetings cut the length of U.S. IPO marketing campaigns in half, to four days from eight days, according to a recent study by Portfolio Media Inc. The survey also found online IPO events attracted increased interest from potential European and Asian institutional investors.
However, Mr. Dale also said hitting the road to meet with institutional investors will continue to be essential for CEOs who want productive relationships with their largest shareholders, and for bankers who want to build ties to clients. He said a hybrid approach to these meetings mean they can occur outside the pressure-packed environment of an IPO or financing done to tight deadlines.
“We have had requests, obviously, from institutions that want to see the whites of the eyes of issuers when they’re talking to them,” Mr. Dale said. For bankers, “those times on the road with the client, especially during an IPO, are so formative for your relationship. You’re flying in planes, you’re having lunches, breakfasts, you’re with that client 100 per cent of the time and there’s no better relationships forged than through that process.”
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