Hootsuite IPO: Moves To Bolster Financial Knowledge Base May Suggest Offering In Works

Back in February, Hootsuite Chief Executive Officer Ryan Holmes stated that the social media company may bring a stock offering public within the next 18 to 24 months, according to the Financial Post. Then in May, Holmes talked about possibly floating an IPO faster than the 18 to 24 months he had envisioned earlier in the year, reports Reuters.

“I’ve talked about 18 to 24 months, but I’m very bullish given the success that Shopify has had, and maybe we will want to speed that up a little bit.”

Ottawa, Canada-based Shopify Inc. (NYSE: SHOP) listed an IPO valued at $131 million, with shares reportedly being priced above the expected range as investors “clamored” for shares, reports the Globe and Mail. Shopify shares were offered for $17 each in late May. This afternoon, shares closed at $31.04, an 82.59 percent return. The Dow Jones Industrial Average (^DJI) lost 3.85 percent over the same period, by comparison.

While Shopify is debt-free, and expected to experience sales growth of 38.9 percent in 2016, it hasn’t proven its ability to run a profitable business, and losses are forecast through the full 2016 year. That investors have sent the shares of such a company skyward has caught the attention of many, including, apparently, Hootsuite CEO Ryan Holmes and perhaps those who might be interested in distributing Hootsuite stock.

Since that time, Hootsuite has announced its first chief financial officer, Sujeet Kini, who was previously employed as the chief accounting officer with Open Text Corporation (NASDAQ: OTEX, TSX: OTC), which went public in the late ’90s and has shares listed on both the Toronto Stock Exchange and the NASDAQ. Open Text offers a suite of software that aids in the “finding, utilizing, and sharing business information.” Kini is said to have also served with PricewaterhouseCoopers and GT Group Telecom, according to Business Insider.

Open Text shares have returned 102.3 percent over the past five years, but are down significantly since their highs seen in early 2015. The Dow Jones Industrial Average has returned 53.6 percent over the same period.

Also, according to Business Insider, Hootsuite has appointed Paul Mcfeeters, who previously served as Open Text CFO, to the board of directors.

“2016 is shaping up to be another high-growth year for us. We’re excited to welcome Sujeet to our leadership team and Paul to our board of directors,” Ryan Holmes was quoted. “Their strong financial leadership is ideal for the next chapter in Hootsuite’s growth.”

Hootsuite’s moves not only increase the level of accounting and financial market competency within the firm’s ranks, they also create a perception of partnership between Open Text and Hootsuite, and that similar things must be taking place at both companies. As Ryan Holmes states, both companies are familiar with rapid financial growth.

While Shopify isn’t profitable, Open Text is thoroughly so. OTEX EPS of $3.51 and $3.69 is the consensus for fiscal 2016 and 2017, respectively. Only single digit growth is forecast over the coming future and EPS is expected to fall 19.6 percent year over year for the first quarter of 2016, which ended on Sept. 30.

Open Text has a return on equity of 13.5 percent, a profit margin of 12.7 percent, $711.2 million in cash, and $1.59 billion in debt. The firm carries a debt to equity ratio of 86.8 percent.

Shopify earnings are scheduled to be announced on Wednesday, November 4. Open Text first quarter 2016 financial results are expected after the close of the stock market, with a conference call at 5 p.m. ET tomorrow, October 28.

Going with Hootsuite CEO Ryan Holmes’ February estimate of 18 to 24 months, an IPO might be expected by the fall of 2016. Now that he has said that he might want to speed that schedule up and Hootsuite has made necessary human capital acquisitions to make a public offering realistic, an IPO announcement might be expected at any time.

Open Text stock is down 22.6 percent year to date, compared with 1.7 percent for the Dow. Further selling in OTEX shares could cause investor sentiment on Canadian tech to sour. Hootsuite would likely, and logically so, want to offer shares before Open Text shares have the chance to move much lower. Meaning, for Hoosuite, if they intend to do so, the sooner they can get an IPO deal completed, perhaps the better.

[Feature Photo Courtesy Hootsuite/Flickr]