Small caps finding equity despite market mayhem
There’s a glimmer of hope this week, and the timing couldn’t be better. Forget about the success that Great-West Life, RBC, Manulife, BMO and GMP have had with the equity markets. The real story is that some small caps have also basked in a sun that has been hidden for weeks. Who knew there was a small cap market? This is better than a Santa Claus rally.
First it was Wellington Financial Fund III portfolio company Polaris Minerals (PLS:TSX), announcing a $25 million bought deal equity financing last evening. GMP Securities was the lead underwriter on that one. It was a unit offering, mind you, which isn’t perfect. But in this climate, you don’t look a gift horse in the mouth. Use of proceeds was to refinance the bridge loan that Polaris raised in August to acquire a strategic piece of land in California.
And then, out of the blue this morning, ATS Automation (ATA:TSX) announced a $50 million bought deal, also led by GMP Securities. At a 7% discount to yesterday’s close, the deal is priced well for both sides. And not far off the share price when the new CEO joined the firm after the reorg (see prior post “ATS shareholders find their tonic” November 21-07). How many other stocks are flat over the past 12 months?
The mindset of the portfolio managers who are buying these deals is sensible. Rather than pick away at “undervalued” names that they like (perhaps even own) on the board, they are buying shares from treasury. In some ways, that’s to be preferred at this point in the economic cycle. Buy a share on the board, and you are just taking stock away from someone else. Buy a share directly from a company that you like, and the capital goes to work on your behalf.
As one friend on Bay Street is wont to say “flat is the new up.” Congrats to both companies, and to the underwriters brave enought to stick their necks out with a small cap bought deal.
MRM
(disclosure – our Fund III owns warrants in PLS)
Did your firm provide the bridge for Polaris in Aug/08? “Bridge” has been a 4-letter word for quite some time in my neck of the woods.
Bridge a Four Letter Word? What neck of the woods are you from, Brad?
Coincidentally, this bit of news just recently landed on my desk:
“The European Commission has just announced an agreement whereby English will be the official language of the European Union rather than German, which was the other possibility .
As part of the negotiations, the British Government conceded that English spelling had some room for improvement and has accepted a 5-year phase-in plan that would become known as “Euro-English”.
In the first year, “s” will replace the soft “c”. Sertainly, this will make the sivil servants jump with joy.
The hard “c” will be dropped in favour of “k”. This should klear up konfusion, and keyboards kan have one less letter.
There will be growing publik enthusiasm in the sekond year when the troublesome “ph” will be replaced with “f”. This will make words like fotograf 20% shorter.
In the 3rd year, publik akseptanse of the new spelling kan be expekted to reach the stage where! more komplikated changes are possible.
Governments will enkourage the removal of double letters which have always ben a deterent to akurate speling.
Also, al wil agre that the horibl mes of the silent “e” in the languag is disgrasful and it should go away.
By the 4th yer people wil be reseptiv to steps such as replasing “th” with “z” and “w” with “v”.
During ze fifz yer, ze unesesary “o” kan be dropd from vords kontaining “ou” and after ziz fifz yer, ve vil hav a reil sensibl riten styl.
Zer vil be no mor trubl or difikultis and evrion vil find it ezi tu understand ech oza. Ze drem of a united urop vil finali kum tru.
Und efter ze fifz yer, ve vil al be speking German like zey vunted in ze forst plas.”
Disclosure: I don’t actually own a desk.
Brad
Thanks for the comment. In the case of Polaris, a one year bridge made sense for them. They wanted to close quickly on a great asset purchase opportunity, and didn’t have time to raise equity.
The deal we were part of gave Polaris management the capital to close, and then tap the equity markets on their own timetable.
Which is exactly what happened last night. Good execution in my books.
Happy holidays.
MRM
So there was possibility for German to become the official language of the European Union? I never heard about that