Confidia IPO questions
One question continually posed to Confidia’s upper management is: “Are you going public?”
It is true that Confidia explored a reverse takeover of a publicly listed company on a UK exchange late 2020. We did quite a bit of work on this but eventually decided not to proceed. There were several reasons for this. One key reason was that we didn’t actually need to go public. A large percentage of companies that list on a public exchange do so because they are in desperate need of equity capital or because one of their key shareholders, like a venture capital or private equity company is pushing them to list. As Confidia is profitable and cash flow positive, there wasn’t a pressing need to go public.
The other issue involved the terms of the deal. While the valuation of Confidia was quite reasonable at over $50 million, many of the shares had to be paid to the shareholders of the public company we were acquiring and of course a very large number of shares had to be sold to the public. While there are some very positive aspects to having a broad, global shareholder base, Cameron McKean, the owner of 100% of the shares, was more interested in providing shares to his employees than in selling them to the public.
And finally, perhaps the biggest reason for staying private was that the timing was off. While we wouldn’t want to sell shares to the public right when earnings peak, as that would be unethical, we also didn’t want to sell shares to the public at such a cheap valuation. Confidia is entering a strong growth phase right now, which is expected to continue for at least a few years. It therefore makes much more sense to sell shares to the public after they can see a track record of strong growth and will be comfortable paying a much higher price.
Thus, look for Confidia to raise a bit of capital in late 2021 as part of our expansion and then to go public in late 2022.