Canada's 724 Solutions makes stunning market debut
Dan's note: What this PR fails to mention is that Sonera also owns 18.1% of 724 Solutions. Sonera BOT 6.4 million shrs at $3.83/share, as did Citigroup. Based on today's close (ie, 71-13/16), Sonera's investment in 724 Solutions (initially $24.48 million) is now worth over $459 million. That's a $435 million increase on its balance sheet in just one day. No wonder Goldman Sachs added Sonera to its European Telecommunications Recommended List with an 80 euro price target. #reply-12713139.
SEC Form F-1/A
sec.gov
By Ian Karleff
TORONTO, Jan 28 (Reuters) - Canadian wireless software company 724 Solutions (NasdaqNM:SVNX) hit the street running on Friday with its shares opening on a when-issued basis at 75-1/4, up 169 percent from its initial public offering pricing of 26 on Nasdaq.
Some market watchers said 724 Solutions could end up as the most successful first day IPO in Canadian corporate history, with its offering price doubling from an initial $11 to $13 range.
''We always expected that our vision was going to be reflected by the markets like this, absolutely,'' 724's co-founder and president, Chris Erickson, told Reuters in a telephone interview.
The shares will trade officially on Nasdaq and the Toronto Stock Exchange on Monday.
Toronto-based 724 has developed technology for the banking industry that filters content to wireless devices, including telephones and personal digital assistants, as well as taking care of security and personalizing customer profiles.
It also allows banking customers to perform traditional banking functions -- trade and analyze stocks, obtain news, horoscopes and weather as well as making direct e-commerce purchases using a wireless device.
724 has licensed its technology to an impressive list of banks, who are also investors in the company -- Bank of Montreal (Toronto:BMO.TO) , Bank of America Corp. (NYSE:BAC) and Citigroup Inc. (NYSE:C) -- with a combined equity stake of 44.4 percent.
Erickson said these three banks, plus Wells Fargo (NYSE:WFC), which is a major licensed user, represent about 152 million customers that could potentially use 724's technology.
724's revenue model is based on the number of users of its technology, plus revenues from consulting services, maintenance, installation and implementation, and increases in the number of banking licensees, Erickson said.
''Just based on the fact that our revenues are based on usage, things are looking good,'' Erickson said.
''It's not just a bunch of venture capitalists out there. It is already a technology that has made the sale to the banks,'' said David Menlow, president of IPOfinancial.com.
The offering of 6 million shares for gross proceeds of $156 million -- a 17 percent stake in the company -- plus a greenshoe option that could take the number to 6.9 million, was wildly oversubscribed.
Paul Allison, head of equity capital markets at Nesbitt Burns, said the offering was 25 to 30 times oversubscribed.
''It's rather unique the profile this company was able to achieve, which is obviously a reflection of its business model. It's quite remarkable,'' said Allison.
''Some people would say they have never seen something like this (in Canada),'' he added.
Seventy-five percent of the offering was distributed to U.S. and international investors, with the remainder sold to Canadian investors, confirmed Nesbitt's Allison, the lead underwriter in Canada.
Credit Suisse First Boston is the lead underwriter in the United States.
Duncan Stewart, a portfolio manager at Tera Capital Corp. in Toronto, described the offering as ''hotter than asbestos'', too hot to get a hold of.
Stewart said he was only able to obtain 2 percent of what he had requested from the underwriters.
Risk factors are numerous for 724 as outlined in its prospectus, with investors wondering if the banks who fostered the company's pre-IPO development will keep the technology to themselves - although none of them are in exclusive agreements.
''It is an assessment that the banks will have to make as far as whether they want to keep this for themselves or distribute this elsewhere,'' Menlow said.
724's Erickson said current relationships will not impede efforts to sign up other financial institutions.
''There is not going to be a problem at all,'' said Erickson, calling his creation ''a generic solution for banks, brokerages and other financial institutions on a global basis and have made sure we can roll this out to every single bank possible.''
So far, only Bank of Montreal has put 724's technology through its paces. The bank is in the midst of testing its wireless banking service, called VEEV, which it said on Thursday has garnered a great deal of customer interest.
Erickson said he is not at liberty to discuss other pilot projects, but said they will commence in the first quarter of 2000, with full-fledged rollouts expected in the latter part of the year.
($1=$1.43 Canadian) |
