On Tuesday, Boat Rocker filed an amendment to its preliminary prospectus. Unfortunately, it appears that the IPO is suffering from weak demand. As a result, it is now simply a primary offering and there will be no secondary offering by insiders as initially announced.
The company now expects to 18.900.000 shares at a price of $9.00 per share for gross proceeds of $170M. This is far below the initial price-range of $12-$14 per share. While it still expects to raise ~$170M, it will need to issue many more shares to do so.
If the overallotment is exercised in full, the company will have have 35,450,365 Subordinate Voting Shares and 23,553,050 Multiple Voting Shares issued and outstanding. This gives it a market cap of approximately $540M and a P/S ratio of 2.29. It also means that it is being valued at only 0.77 times forward sales based on 2021 estimates for revenue of $700M.
Given the significantly weak demand, there is something that is turning investors away. Perhaps it is the breach of covenant on its BMO credit facility after it missed profitability targets. Important to note however, COVID certainly played a role in that issue. The company does expect to use the cash raised to pay down about $90M in debt.
Rumours circulated earlier in the month that the IPO would be on hold due to weak demand. However, after the amendment, it looks as though the company is pushing forward. The IPO is expected to close next Wednesday (March 24) and based on what's happed here, it is one that we'd be extremely cautious with.
Also worth noting, this is not the final pricing - so it could still price above or below $9.00 per share and we'll know those details once its final prospectus is filed.