BUSINESS

DavidsTea, Montreal-Based Chain, Sees Shares Soar On IPO

06/05/2015 09:29 EDT | Updated 06/05/2016 05:59 EDT
MONTREAL - DavidsTea's stock launch soared on Friday, with its shares gaining more than 42 per cent on the Nasdaq following a successful initial public offering by the Montreal-based chain of tea stores as it looks to expand into the U.S. market.

The shares (Nasdaq:DTEA) were priced late Thursday at US$19 per share, opened on Friday at about $25 and closed at $27.14 on a volume of 5.85 million shares.

That's far above the company's previous estimate that the stock would fetch between US$17 and US$18 per share through the IPO.

"For us, it's the beginning of something, to be able to invest in growth," company president Sylvain Toutant told The Canadian Press in an interview from New York.

Currently, the company has 160 outlets, including 134 in Canada. It wants to significantly boost its profile in the United States, where it's had a presence since 2011.

"Historically, North America was exclusively a coffee domain, even though that was not entirely the case in Canada," said Toutant, who was head of Quebec's provincially run liquor corporation, the Societe des alcools, between 2004 and 2007.

"We're seeing the change."

During the current fiscal year, the company wants to open as many as 30 stores in Canada and another 15 south of the border.

In the long term, it aims to open between 30 and 40 a year in the United States to reach about 300.

It currently has stores in New York, Chicago, Boston and San Francisco -- and that's where the company will focus its expansion.

"The majority of the openings will be in markets in which we are already present so that we can create a critical mass," Toutant said. "Every year, we will enter one or two other markets that we find promising."

With at least 5.1 million shares sold by the company and its shareholders, and a further 765,000 available to underwriters, the IPO would have generated up to US$111.4 million from investors before expenses at the $19 stock price.

DavidsTea intends to use its share of the proceeds to repay debts to its shareholders and lenders, with the remaining funds to be used for business activities.

Last year its revenues totalled US$142 million, while comparable store sales — a key indicator in the retail sector — climbed 11.1 per cent.

Toutant said future growth will come internally and not through acquisitions.

DavidsTea's main shareholder is co-founder Herschel Segal, who launched Montreal retailer Le Chateau (TSX:CTU.A).