NOODLES POSTPONES FOLLOW-ON
AFTER STOCK SLUMP
Sponsors behind restaurant chain NOODLES
opted to abandon a planned US$100m-plus
stock sell-down late on Wednesday, after
investors hammered the share price while
underwriters marketed the offering.
Jefferies, Citigroup and RBC Capital Markets
took out a day of marketing to sell 8.75m
Noodles shares or about 20% of the
company, but it proved a fruitless exercise
in a session that saw the Dow Jones
Industrial Average tumble more than 600
points.
The sellers, Catterton Partners, Mill Road
Capital and Argentia Private Investments,
ultimately decided to postpone the offering
after Noodles shares fell 25% to US$9.52 on
the news.
“Everyone loved the stock at these levels,
except the sellers,” one banker on the deal said.
Wednesday’s close was below the US$10
price at which the same sponsors sold
Noodles stock in July.
The launch of the latest offering
coincided with Noodles’ release of third-
quarter earnings and increased full-year
guidance.
But investors still viewed Noodles’
numbers as relatively disappointing.
Analysts at UBS (not on the syndicate)
have a sell on the stock and a US$10 price
target, noting that while Noodles’ third-
quarter results were solid and highlighted
signs of success in its turnaround efforts,
SHAREûPRICEûGAINSûHADûALREADYûREmECTEDû
improvements and comps would become
tougher in upcoming quarters.
Management guided investors to expect
2018 full-year revenue of US$457m-$460m, up
from the company’s previous estimate of
US$450m-$455m, and comp sales growth of
3.5%-4% versus the previously guided 2.5%-3.5%.
Noodles, which has been closing stores in
the past year and was recapitalised by its
sponsors early last year, remains a shadow
of its former self after it staged one of the
hottest debuts of the decade in mid-2013.
Noodles went public at US$18.00 and had
doubled by the end of its debut session
before insiders returned in late 2013 to sell
stock at US$39.50.
IPOs TARGET TIGHT END-OF-YEAR
WINDOWS
QUALTRICS INTERNATIONAL, a provider of
CUSTOMERûEXPERIENCEûSOFTWARE ûlLEDûONû
October 19 for a US$200m Nasdaq IPO that
could be one of the last cloud software new
issues of the year.
Qualtrics’ 40% top-line growth and
sizeable annual revenue base of nearly
US$370m at the current run rate may prove
appealing, even in a market that has seen
the sector’s runaway multiples compress in
recent weeks.
Morgan Stanley and Goldman Sachs will lead
a syndicate of a dozen underwriters.
They will have to thread some tight end-
of-year windows, with many investors
starting to switch into risk-off mode.
Founded in 2002 by brothers Ryan and
Jared Smith and backed by venture capital
lRMSû!CCEL û)NSIGHTû6ENTUREû0ARTNERSûANDû
Sequoia Capital, Qualtrics offers softwarethat helps companies collect, analyse and
act on customer experience data.
It counts companies such as recently
listed SurveyMonkey as a competitor.
CALIBURN INTERNATIONAL, a government
contractor that provides engineering, medical
ANDûENVIRONMENTALûSERVICES ûPUBLICLYûlLEDûONû
October 19 for an NYSE IPO, also putting it in
the frame to go public by the end of the year.
The company generated US$381.6m in
revenues last year, 88% of which came from
US federal government clients.EQUITIES EMEACuraleaf sprouts roots with
US$400m IPO
US Grower gains flexibility with CSE listingThe Canadian Securities Exchange (CSE) is
sprouting green shoots, with a parade of US
cannabis companies flocking to the fledging
Canadian exchange.
Cannabis is legal to varying degrees in 30 US
states, but remains illegal at a federal level. As
a result, larger exchanges (NYSE, Nasdaq, TSX)
will only touch the green stuff for companies that
limit operations to jurisdictions where cannabis
is legal.
“The TSX is a publicly listed company that
has a board of directors. They are spooked by
US regulations,” said one Canadian banker. “The
CSE is not spooked.”
CURALEAF, a vertically integrated cannabis
producer based in Wakefield, Massachusetts,
is the latest US company to go public on the
CSE, jokingly labelled by some as the cannabis
securities exchange.
Curaleaf raised US$400m (C$520m) last
week from a private placement as part of its
reverse takeover of Canadian junior miner Lead
Ventures.
GMP Securities and Canaccord Genuity, the
leads on the private placement, saw more than
100 institutions across the US, Europe and
Canada participate.
That strong demand allowed them to place
45.3m subscription receipts at C$11.45, near the
top of the C$8.56–C$11.47 marketing range,
to raise US$400m, well above the US$100m
initially targeted.
Curaleaf, which achieved a US$4.4bn
valuation on the stock sale, is using proceeds to
expand to 47 cannabis dispensaries, from the 28
it currently operates in nine US states.
“They tend to focus on states that have
stricter regulation and harder-to-gain licences to
operate,” said a second source familiar with the
offering.
New York, New Jersey, Massachusetts and
Florida - where cannabis is legal for medicaluse but not recreational and where licenses are
limited - are among those states.
Curaleaf is scheduled to begin trading on the
CSE on Monday.
There are plenty of other US cannabis
companies that have raised capital on the CSE to
fund expansion.
MEDMEN ENTERPRISES, now a C$2.9bn market
cap company, raised C$130m through its CSE
listing in April; CHARLOTTE’S WEB went public
on the exchange in August; and GREEN THUMB
INDUSTRIES completed a C$62m raising as part of
a reverse takeover, also in August.
CRESCO LABS, a vertically integrated grower
based in Chicago, Arizona-based HARVEST
ENTERPRISES, and New York-based ACREAGE
HOLDINGS are among the US companies that are
planning to list on the CSE.
Overall, there are 49 cannabis companies with
operations in the US now listed on the CSE, out
of 106 marijuana companies on the exchange,
according to CSE data.
Plenty of Canadian growers, however, have
opted to list on the NYSE, Nasdaq or TSX to
increase their profiles, and trading liquidity.
CANOPY GROWTH, now a US$9bn market cap
Canadian grower, transitioned its TSX stock listing
to the NYSE in May. AURORA CANNABIs (US$7bn
market cap), another Canadian grower, similarly
transplanted to the NYSE, and TSX-listed APHRIA
(C$4bn) has filed paperwork to do the same.
TILRAY (US$9.9bn), yet another Canadian
grower, chose Nasdaq for its IPO in July,
following CRONOS GROUP (US$1.4bn) as the first-
ever Canadian grower to list on a US exchange
with its Nasdaq listing in February.
“A lot of the big Canadian operators are going
through a difficult thought process. Do they de-
list from the TSX, NYSE or Nasdaq, list on the
CSE and merge with US operators, or remain on
a larger exchange for greater visibility?”
Stephen Lacey