# Hydro One (IPO)



## james4beach

*Hydro One (H)*

This is going to be one of Canada's biggest IPOs in recent history
http://www.cbc.ca/news/canada/toronto/hydro-one-sale-1.3233695

Apparently a preliminary prospectus for Hydro One has been filed. I see a number on documents on SEDAR:
http://sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00014266

Maybe we can share some thoughts in this thread, now that we have all kinds of financial documents. e.g. interim financial statements (Aug 11). A couple notes from me:
- I see a book value of $8.3 billion
- I'm suspicious of the $457 million in intangible+goodwill assets
- I see a large, ~ $1 billion debt principal repayment due in 2019

Many of my friends work in hydroelectric utilities (including Hydro One) and their impression is that Hydro One is not the best operation, so I'd value it less-than-average. They're also going public at a weak time in markets, so that reduces the value further. Here's my crude valuation based on a P/E of 18 and a price-to-book ratio of 1.4.

P = 18 x net income = 18 x (4 quarters x $136 million) = $9.8 billion
P = 1.4 x book value = 1.4 x $8.3 billion = $11.6 billion
The average of these is around $11 billion

It sounds like the analysts and underwriters back in April wanted to value it around $14 billion but *my guess is closer to $11 billion*. Let's keep in mind that utility equity values have all fallen since April.

Note that this June news release is still referencing stale valuation estimates from April, thus the province and underwriters are exaggerating how much the IPO is worth. The news article is describing it as around $15 billion which, without question, is the very high end of what it could possibly be worth.

This was only a very rough look (in half an hour), but I might revise the estimate after studying the financial statements further. I'm interested to hear other's thoughts and see other calculations on valuations


----------



## james4beach

By the way, this will be Canada's largest IPO since Manulife in 1999. This is a big deal. You will be hearing from brokers etc who want you to get "in on the IPO", so you'd better figure out valuations.

Banks will take lower fees on the IPO, apparently. Well aren't they saints, I'm so touched.

Remember that both the owner (Ontario) and the underwriters (the banks) want to inflate the value of the IPO. Do your due diligence and don't trust what the banks say is the valuation. I have yet to see valuation from an independent analyst; every article so far just references Ontario and the underwriters. Don't get screwed... be careful. I can't wait to see what the market value actually settles at, a few months after IPO.


----------



## Davis

Interesting analysis. I have some Hydro in my portfolio -- Algonquin, Innergex, Brookfield Renewable -- but I want to find out what the best astrologers in Hyderabad have to say on the question before I invest.


----------



## MrMatt

Big deal, high profile, political.

I'm staying away, no way to get a great deal on this.

That being said there are already other electrical utilities that could get a bit of a bump from the higher profile. Though they're already quite well known in investing circles already.


----------



## james4beach

I agree this is probably something to avoid, seems unlikely you'd get a great deal on it.

Many IPOs are flops, anyway. It's better to wait and let it trade for a few months and see how it plays out.


----------



## Eclectic12

MrMatt said:


> Big deal, high profile, political.


You mean like the Harris gov't saying in 1998 they did not play to sell Hydro One, then announced in 2001 they planned to sell and then backed off?
http://goldblattpartners.com/experience/notable-cases/post/privatization/


Cheers


----------



## Ponderling

Why buy when 40% of the stock will still be in government hands so the Government will still control this puppet?


----------



## atrp2biz

Davis said:


> Interesting analysis. I have some Hydro in my portfolio -- Algonquin, Innergex, Brookfield Renewable -- but I want to find out what the best astrologers in Hyderabad have to say on the question before I invest.


These companies are not in the same business. Hydro One is in the wires business (eg. transmission and distribution)--much like FTS and EMA to a lesser extent. Companies like BRP and TransAlta are generators (Independent Power Producers). Generators are NOT utilities. The risk factors of these companies are completely different. Generators are generally sensitive to natural gas prices and supply/demand dynamics in the jurisdictions they operate in. Wires companies are more sensitive to interest rates and operational performance, particularly in jurisdictions that practice performance based ratemaking regulation.

This distinction is analogous to upstream oil producers and pipeline companies.


----------



## HaroldCrump

This is as politically infested as anything can ever get.

*Hydro One employees are being given free shares, and have been promised more free shares every year moving forward*.
Expect continuous dilution in the coming years as unions & politicians play ping-pong with each other, using free shares as the ball.

I do not trust any numbers they are reporting currently in their IPO filing.

*Hydro One is one of most notorious in the public sector for unsustainable pension liabilities*.
Again, unions and politicians will use pensions as ping-pong ball.

Lastly, regarding the IPO, small retail investors will most likely be shut out because of institutional demand.
*Pension funds are tripping over each other *to get their piece of a taxpayer-funded, politically guaranteed monopoly business.

This is likely to be a political quagmire for years to come.
IMO, there are far, far better options out there for utility sector allocation of your portfolios.


----------



## My Own Advisor

I'll let this play out for a few months, then buy. Might as well be an owner of what I consume.


----------



## OnlyMyOpinion

My Own Advisor said:


> I'll let this play out for a few months, then buy. Might as well be an owner of what I consume.


Wouldn't it have been a nice (politically motivated) gesture if the province had provided everyone with a small, one-time credit on their hydro bill using a small portion of the proceeds of the share issue. Oh well, we all know that they have better uses for the money than the average bill-payer


----------



## daddybigbucks

I'm way down at the $4 Billion Value. 
So I don't think ill be participating in the IPO.


----------



## Woz

james4beach said:


> Here's my crude valuation based on a P/E of 18 and a price-to-book ratio of 1.4.
> 
> P = 18 x net income = 18 x (4 quarters x $136 million) = $9.8 billion
> P = 1.4 x book value = 1.4 x $8.3 billion = $11.6 billion
> The average of these is around $11 billion


I don’t think $544M is very accurate forecast for their annual net income. Q2 seems to be a low point for income every year. Q1 and Q2 income are up YoY and their net income each of the past three years has been $749M, $803M, and $745M. I’d be surprised if they did less than $700M this year. Even if you used 2015 Q1/Q2 income and multiplied by two you’d get $742M. Using your 18 multiple, that would give a value of ~$13B.

The sale of Altalink is the most similar recent deal. Altalink had a book value of $2.4B, net income of $216M, and sold for $7.2B in Dec 2014. Hydro One is about three times larger.


----------



## Value

How would one go about buying some shares at their initial pre-market pricing?

Oh and may I add : Very stupid move by the Ontarian government... You need the milk, so sell the cow! Smart long term move there!


----------



## HaroldCrump

Value said:


> How would one go about buying some shares at their initial pre-market pricing?


Only way to do that is via an EOI (Expression of Interest) if your brokerage is one of the participating brokers, such as Scotia Capital.
Following is the email I received from my brokerage (Scotia iTrade) to participate in the IPO.

However, I believe there are very few shares available to retail investors.
The IPO is already over-subscribed by the institutions.
You may get a very small number of shares, if at all.


----------



## OnlyMyOpinion

The IPO already shows as closed to expressions of interest on TD WebBroker.


----------



## HaroldCrump

Scotia iTrade is still showing Open as of 2:30 pm.
Not sure if it is updated, though...the online status is often not reliable.


----------



## Value

Thanks Harry!!
Say do you have a contact info for Karine Abgrall....

Can you PM me her email or phone number... I`ll get a hold of her and see what I can do to get some shares in my hands...


----------



## HaroldCrump

Value said:


> Thanks Harry!!
> Say do you have a contact info for Karine Abgrall....
> Can you PM me her email or phone number... I`ll get a hold of her and see what I can do to get some shares in my hands...


That was just the contact information on the email...I don't think you can (or need to) get in contact with her directly.
If you are a Scotia iTrade client, just go under the Trade tab > IPO and click on the Buy button next to Hydro One.
As of 2:30 it was still showing as Open.


----------



## Value

Do you know what these shares trade for as of now? I wanted to get a hold of her in the hopes or reserving some shares... 

I will have to open an account with them... So I`ll go ahead and do that... 

If you have a gimme your refferal code... I was looking for a new place to shove my RRSP...


----------



## HaroldCrump

Value said:


> Do you know what these shares trade for as of now?


Shares haven't started trading yet...it's an IPO.



> I wanted to get a hold of her in the hopes or reserving some shares...


If you are not an existing client of Scotia iTrade, this won't help you.



> I will have to open an account with them... So I`ll go ahead and do that...


Sure, you can...but it won't be in time for participating in the Hydro One IPO.
If not already closed, the IPO will be closed to retail investors within the next couple of days.

Which brokerage are you currently with?
Have you checked their IPO dashboard to see if they have made the H1 IPO available?


----------



## Value

Im currently with Questrade.

I've written to the customer service at scotia... Hoping they could help me... Even if it seems like far fetched. 

Sorry for my lack of knowledge on this, it's the first time I go through one of those.


----------



## blin10

anyone with bmo investor line? where is the ipo tab there ?


----------



## HaroldCrump

Hydro One is being promoted as a dividend stock with a ~ 4.4% yield.

http://bit.ly/1PtrAjC


----------



## AltaRed

blin10 said:


> anyone with bmo investor line? where is the ipo tab there ?


No IPO tab. Based on my last dialogue with them, they are working on it. Not sure what their issue really is.


----------



## HaroldCrump

As of this afternoon, Scotia iTrade is still showing Hydro One IPO as open.


----------



## blin10

HaroldCrump said:


> As of this afternoon, Scotia iTrade is still showing Hydro One IPO as open.


most likely people will not get their orders filled... that's just how it is with popular IPOs, you place an interest but it will not get allocated


----------



## AltaRed

HaroldCrump said:


> As of this afternoon, Scotia iTrade is still showing Hydro One IPO as open.


Yes and so is RBC DI, both for Ontario and non-Ontario residents.

FWIW, my experience has been that participating in IPOs is pretty much a crap shoot on a value basis. Some trade lower quickly, others trade up initially and then trade below IPO at a later time and a few are home runs. I no longer participate in IPOs since my probably of success is higher after the fact.


----------



## Eclectic12

^^^^

From what I've observed - IPOs are a crap shoot on multiple levels.

The first is popularity. My sister was sure that by signing up for the TD Waterhouse IPO in the first day or two around June 1999, she'd be able to buy. The IPO was popular so almost nothing went to retail investors as the institutional investors took. She was able to buy nothing.

The second is what the stock does after IPO. As I recall, if she'd been able to buy - it did rise from the IPO prices ($34?) a while (maybe $45?). But then it dropped where I believe I bought some shares less than a year later for about $8 Canadian. In 2001 or so, TD bank did a forced buyout of all the outstanding shares for around $11.

It made for interesting reading to compare the newspaper articles at the time that touted "independent committee confirms offer as fair value" versus the discussion notes of that year's annual report. The discussion notes documented that that independent committee fought for a higher price than what was eventually settled for.


As a TD Waterhouse stock owner, I hated the buyout but as a TD Bank stock owner, I loved the deal.



Cheers


----------



## HaroldCrump

AltaRed said:


> Yes and so is RBC DI, both for Ontario and non-Ontario residents.
> FWIW, my experience has been that participating in IPOs is pretty much a crap shoot on a value basis. Some trade lower quickly, others trade up initially and then trade below IPO at a later time and a few are home runs. I no longer participate in IPOs since my probably of success is higher after the fact.


Oh I agree...I was simply pointing out to poster Value above that IPO is still open on Scotia iTrade, in case he/she wants to place a bid.
I am not planning to place a bid on this IPO - there are a whole variety of issues with this particular offering.


----------



## Value

Guys,

My feeling is, that this could be a quick buck... 
As you guys stated, institutionnal investors looooooved government backed companys and I think as soon as trading starts for this, the price will rise for one or two days as people rush to get in. 

Then like all other IPO`s, the price would go under the price of the IPO and that would be the time to buy in the long run.

My goal would be to buy now and sale within 48 hours of trading on it. But, for sure, it`s not a safe bet.


----------



## HaroldCrump

^ what makes you think it will open at the IPO price i.e. you will be able to buy at 9:30 a.m. for $21?
If the demand is going to be as crazy as you predict, it may open at $30, $40, $50...who knows what?
Or, it may open at $17 and go lower....


----------



## Value

Sorry for my lack of knowledge on the matter, but I was under the impression that with Scotia`s offer you would already have shares to you at 19 to 21 before it hits the market.


----------



## HaroldCrump

Value said:


> Sorry for my lack of knowledge on the matter, but I was under the impression that with Scotia`s offer you would already have shares to you at 19 to 21 before it hits the market.


Yes, if you manage to get an allocation.
However, as blin10 and I pointed out above, placing a bid (called Expression/Indication of Interest) does not guarantee you will get your desired # of shares, or any shares at all.


----------



## Value

Yeah, I really doubt I will have the chance to get some before it hits the market... 
But I would be interested if I could as I think it would go up for a day or two and could sell with a quick profit (so I think).

However, I doubt it will be possible as I have to transfer my RRSP to scotia, which takes some time.


----------



## AltaRed

Value said:


> Yeah, I really doubt I will have the chance to get some before it hits the market...
> But I would be interested if I could as I think it would go up for a day or two and could sell with a quick profit (so I think).


As long as you know this is a circa 50/50 crap shoot for a profitable trading opportunity. A very quick over subscription tends to improve the odds of a trading opportunity but it is still speculative. In this case, the fact that iTrade and RBC DI still had this listed as Open a day or so after first offering EOI's doesn't sound attractive to me. Granted it is a large size offering. However, contrast that with the ENF offering which was over-subscribed within hours (I believe). Then again, investors have been falling over themselves on utility and pipeline secondary offerings for years now.


----------



## Value

AltaRed said:


> As long as you know this is a circa 50/50 crap shoot for a profitable trading opportunity. A very quick over subscription tends to improve the odds of a trading opportunity but it is still speculative. In this case, the fact that iTrade and RBC DI still had this listed as Open a day or so after first offering EOI's doesn't sound attractive to me. Granted it is a large size offering. However, contrast that with the ENF offering which was over-subscribed within hours (I believe). Then again, investors have been falling over themselves on utility and pipeline secondary offerings for years now.


My point on it is that foreign institutions will jump at the opportunity to get into something that is government backed as it's been trending for some time now.
But, I could centainly be wrong... Still, I think it's worth a shot.


----------



## blin10

Value said:


> My point on it is that foreign institutions will jump at the opportunity to get into something that is government backed as it's been trending for some time now.
> But, I could centainly be wrong... Still, I think it's worth a shot.


I think you're right and we will see an easy 10-20%+ gain out the gate... this is a very popular IPO, TD guy said they were all out in the first 5 minutes of listing it, that alone says alot... i'm myself in for 4000 shares, but I doubt i'll get allocation


----------



## AltaRed

True it might provide an early bump from foreign institutional investors given the cheap loonie.


----------



## blin10

Royal bank DI still shows Hydro one abailable, I'm not sure why they do that when it's obvious shares are all gone...


----------



## james4beach

HaroldCrump said:


> Hydro One is being promoted as a dividend stock with a ~ 4.4% yield.


That's a good move by the investment banks! Riding the hype of dividend stocks can further boost the buying interest, particularly from retail investors.

My guess is that how the stock price moves, once public, will largely depend on the TSX mood at the time. If it's a weak market (as it is today) the share price would fall, I think. If on the other hand the TSX strengthens again and people are in a buying mood, perhaps it will do well.

I will not be buying Hydro One until at least a couple years pass, so I can see quite a few financial reports and also observe how the stock trades.


----------



## blin10

james4beach said:


> Riding the hype of dividend stocks can


Does anyone know how to block a user, so when he posts I don't see it? I'd like to block james4beach but I do not see such option


----------



## james4beach

blin10 said:


> Does anyone know how to block a user, so when he posts I don't see it? I'd like to block james4beach but I do not see such option


Yes, go to your Settings and then Edit Ignore List. You can try this link
http://canadianmoneyforum.com/profile.php?do=ignorelist

Beware, blocking opinions you disagree with is a path to Confirmation Bias. I think it's healthy to at least consider possibilities that you don't immediately agree with.


----------



## HaroldCrump

james4beach said:


> That's a good move by the investment banks! Riding the hype of dividend stocks can further boost the buying interest, particularly from retail investors.


The dividend *should* be quite safe because (1) it is backed by the govt. and (2) provincial govt. has full flexibility to hike rates for consumers to cover the dividend, as you can see by the fact that hydro rates are going up (again) starting 1st Nov.

Keep in mind that the purpose of Hydro One IPO is primarily to enrich the Hydro One employees and a back-handed way to transfer public assets into private pension plans (OTPP, OMERS, etc.).

Public opinion has been strongly against the egregious & obnoxious compensation of Hydro One, OPG, OPA, etc. workers, esp the executive management.
The province can no longer go on enriching these fatcats directly.
Therefore, they have come up with schemes such as this to compensate them.

There is going to be a constant dilution of retail investors as more and more stock is issued to insiders and employees - this was part of the recently negotiated deal with the union.
Right off the bat, they are being paid large chunks of stock as "bonus".
Then every year there will be new stock issued in lieu of salaries and bonuses.

Most of the IPO will be lapped up by the 3 - 4 large pension plans (OTPP, OMERS, HOOPP, & PSPP) - they love monopoly, taxpayer backed businesses.

It may sound cynical, but if one wants to buy the stock purely from a dividend perspective, it should be pretty safe...


----------



## andrewf

I hope that the increased scrutiny will lead to better management. I don't have a lot of faith in politicians holding managers of large enterprises accountable in an effective way.


----------



## HaroldCrump

They don't care.
The ON govt. spat on the face of multiple A/G reports about OPG/OPA/H1 management, governance, and consumer practices.
The govt. is retaining control of the company anyway.

Secondly, _who _in the market is going to impose this governance and scrutiny...the stock will have low float.
Most of the stock will be held by insiders (management & employees) and the large pension funds.
Both these groups are interested in steady, guaranteed dividends and monopolistic control of the consumer rates.
There isn't going to be any reform.


----------



## andrewf

I hope that the increased scrutiny will lead to better management. I don't have a lot of faith in politicians holding managers of large enterprises accountable in an effective way.


----------



## james4beach

This might start trading on the TSX as soon as Thursday, I heard on the radio.

I think the province would be better off trying to time it with a strong stock market. Good luck to them.


----------



## AltaRed

andrewf said:


> I hope that the increased scrutiny will lead to better management. I don't have a lot of faith in politicians holding managers of large enterprises accountable in an effective way.


With the government still holding 85%(?) of the enterprise, there cannot be no 'real' change. Have to give the private sector a controlling stake to make real change. I wouldn't own anything the ON Liberals have their 'hands in'.


----------



## james4beach

And to clarify, I'm not saying there's anything wrong with the Hydro One dividend. I'm just saying it's a non issue, because what's much more important for a public shareholder is the (1) starting public valuation and (2) total return performance going forward

I can't wait to see where the shares will settle after the first year of trading.


----------



## andrewf

AltaRed said:


> With the government still holding 85%(?) of the enterprise, there cannot be no 'real' change. Have to give the private sector a controlling stake to make real change. I wouldn't own anything the ON Liberals have their 'hands in'.


I think the fear of embarrassment combined with the increased disclosure requirements might help.


----------



## gibor365

HaroldCrump said:


> ^ what makes you think it will open at the IPO price i.e. you will be able to buy at 9:30 a.m. for $21?
> If the demand is going to be as crazy as you predict, it may open at $30, $40, $50...who knows what?
> Or, it may open at $17 and go lower....


Exactly  this is why we shouln't talk about yield = 4.4%, but about dividend = $ 0.84 

I'd suspect it will be going up from the opening, than in the afternoon will go down (as those who bought at better price would book some profits ) and how it will finish depends on market's mood 



> The dividend *should* be quite safe because (1) it is backed by the govt. and (2) provincial govt. has full flexibility to hike rates for consumers to cover the dividend, as you can see by the fact that hydro rates are going up (again) starting 1st Nov.


 I agree, dividends should be very safe ....
depends of stock price and my availability at work , I may initiate small position


----------



## james4beach

An interesting thought is, how does the safety of the Hydro One dividend compare to a coupon payment of a Province of Ontario bond?

Obviously the bond is safer, but I wonder by how much


----------



## AltaRed

andrewf said:


> I think the fear of embarrassment combined with the increased disclosure requirements might help.


They will both help, especially the disclosure requirements but the government will still control the bulk of Board decisions and probably senior management positions too. It is hard to shake civil service behaviour without a very strong and fresh leadership style. As an example, it took the original Encana forever, really a breakup of the company, to break old Alberta Energy Company behaviour.


----------



## blin10

i had requests with 3 banks for the ipo and none got allocated... I don't understand what is the point to even offer it to retail investors as it's pretty clear everything was bought up by big boys... it feels like a scam to me


----------



## andrewf

Maybe I don't understand IPOs, but why do they sell below the market clearing price? I mean, why not a 2nd (or kth in this case) price auction?


----------



## AltaRed

andrewf said:


> Maybe I don't understand IPOs, but why do they sell below the market clearing price? I mean, why not a 2nd (or kth in this case) price auction?


Not sure I understand what you mean exactly. Most IPOs are bought deals by the underwriters and it is the underwriters that then take the risk of selling their allocations to investors. To cover off their risk, underwriters insist the issuer price their offering UNDER market prices to help ensure the allocations get taken up. There have been a number of instances in the past where that has not happened and the underwriter either has to hold the inventory until market prices improve to the point the underwriter can unload them into the market at break even, or to move them at a loss. 

Secondary offerings are usually easy to price based on recent trading history. Initial offerings are harder to price and there is usually a higher margin of error that the underwriters insist on (by taking a look at similar competitors in the market and pricing the IPO off metrics like cash flow multiples, dividend yield, etc. The key is underwriters do not want to be holding inventory.


----------



## HaroldCrump

james4beach said:


> An interesting thought is, how does the safety of the Hydro One dividend compare to a coupon payment of a Province of Ontario bond?
> Obviously the bond is safer, but I wonder by how much


I'd say the bond is safer by a wide margin.
Defaulting on the bond would be what the ratings agencies call a "credit event".
The dividend can easily be suspended without missing a beat.

Those planning to buy shares should be aware that regardless of what % of the "company" is being spun off, the public sector will control nearly 98% of the "company" in various forms.

The vast majority of the ~ 13.5% of Hydro One that is being spun off will be owned by the public sector pension funds (OTPP, OMERS, PSPP, etc.), and Hydro One employees, who have been given free shares.
There is automatic dilution built in since moving forward Hydro One employees will receive free shares as bonuses and as part of their union contract.

The stake owned by true retail investors (i.e. non public sector institutions & non employees) will essentially be a rounding error.


----------



## gibor365

> There is automatic dilution built in since moving forward Hydro One employees will receive free shares as bonuses and as part of their union contract.


 But this practice exist in practically all big companies like banks, IT etc


----------



## james4beach

HaroldCrump said:


> I'd say the bond is safer by a wide margin.
> Defaulting on the bond would be what the ratings agencies call a "credit event".
> The dividend can easily be suspended without missing a beat.


I agree



> The stake owned by true retail investors (i.e. non public sector institutions & non employees) will essentially be a rounding error.


Yup, so it's not like the company will represent your (the investor's) interests


----------



## GoldStone

AltaRed said:


> With the government still holding 85%(?) of the enterprise, there cannot be no 'real' change. Have to give the private sector a controlling stake to make real change. I wouldn't own anything the ON Liberals have their 'hands in'.


+1

Don't forget, unions will have a stake too.

Ontario turns into a banker for unions so they can buy Hydro One shares


----------



## AltaRed

gibor said:


> But this practice exist in practically all big companies like banks, IT etc


Sometimes. Responsible companies buy back public float to pay for most/all of exercised options/bonues and avoid dilution. Cash strapped (and scumbag) companies dilute their public float by issuing new (Treasury) shares to pay for exercised options/bonuses.


----------



## gibor365

> Sometimes


 All Canadian banks have ESP and many can buy shares witj 50% discount


----------



## AltaRed

gibor said:


> All Canadian banks have ESP and many can buy shares witj 50% discount


That is a component of the compensation program, part of salaries and benefits, not unlike health care, group insurance, employer contributions to stock savings plans, personal days off, etc. Nothing to do with shareholder dilution or not. The different shareholder matter then becomes whether the shares purchased come from Treasury or are bought from public float.

The HydroOne union deal is essentially a compensation benefit. A loan to buy shares (non-votable) until the loan is paid off. That is smart business. Find a way for the union to be part of the success of the organization by purchasing shares at IPO (not shares in addition to the IPO).


----------



## james4beach

The ticker will be *H*, starts trading Thursday.

For the IPO, they were able to sell a minimum of 81.1 million shares @ $20.50 = $1.66 billion. That's apparently for 13.6%, it values all of Hydro One at $1.66 billion / 0.136 = *$12.2 billion*

In my first post, I estimated



james4beach said:


> It sounds like the analysts and underwriters back in April wanted to value it around $14 billion but *my guess is closer to $11 billion*...
> 
> Note that this June news release is still referencing stale valuation estimates from April, thus the province and underwriters are exaggerating how much the IPO is worth. The news article is describing it as around $15 billion which, without question, is the very high end of what it could possibly be worth.


----------



## james4beach

Woz said:


> I don’t think $544M is very accurate forecast for their annual net income. Q2 seems to be a low point for income every year. Q1 and Q2 income are up YoY and their net income each of the past three years has been $749M, $803M, and $745M. I’d be surprised if they did less than $700M this year. Even if you used 2015 Q1/Q2 income and multiplied by two you’d get $742M. *Using your 18 multiple, that would give a value of ~$13B.*


Possibly the best estimate so far? I agree that I made a mistake by only looking at one quarter's income, that was naive. Woz's approach of extrapolating the full year income from past quarters is more accurate.


----------



## gibor365

So anyone planning to buy tomorrow H?!


----------



## Hiitsme

IPO in a few mins...predictions anyone? I'm waiting for the dust to settle.


----------



## blin10

ill be getting in with smaller position (still pissed my ipo expression didn't get filled)


----------



## Hiitsme

blin10 said:


> ill be getting in with smaller position (still pissed my ipo expression didn't get filled)


Wonder what time the big boys will be finished skinning the cat.


----------



## RUSH2112

Trading has been halted at unions request.


----------



## supperfly17

RUSH2112 said:


> Trading has been halted at unions request.


What does that even mean.


----------



## blin10

got in at 70 cents above ipo, not bad... now lets check this thread in half a year


----------



## Hiitsme

RUSH2112 said:


> Trading has been halted at unions request.


Don't see that.


----------



## supperfly17

Hiitsme said:


> Don't see that.


Got in at 21.50 for 100.


----------



## RUSH2112

supperfly17 said:


> What does that even mean.


That means the stock can not trade on the market.

No buying or selling.

This was on a 8:07 a.m. press release.

Apparently the board was not being allowed to oversee the offering but I have not had time to research it.


----------



## Hiitsme

supperfly17 said:


> Got in at 21.50 for 100.


I need about 2500 shares at that price to have the dividend cover my hydro bill.:chargrined:


----------



## RUSH2112

RUSH2112 said:


> That means the stock can not trade on the market.
> 
> No buying or selling.
> 
> This was on a 8:07 a.m. press release.
> 
> Apparently the board was not being allowed to oversee the offering but I have not had time to research it.


Trading has been resumed I assume after a phone call to the higher powers.

No doubt the bankers will get richer and this will end up costing taxpayers dearly pushing Ontario further to the brink.


----------



## blin10

RUSH2112 said:


> Trading has been resumed I assume after a phone call to the higher powers.
> 
> No doubt the bankers will get richer and this will end up costing taxpayers dearly pushing Ontario further to the brink.


so if you think bankers will get richer, then why don't you buy H and get richer too?


----------



## HaroldCrump

RUSH2112 said:


> No doubt the bankers will get richer and this will end up costing taxpayers dearly pushing Ontario further to the brink.


It's not the bankers that are getting rich.
In fact, Scotiabank and Royal have a discount to the province (taxpayers) towards their customary investment banking fees for doing the bought deal.

So who is getting rich?....it's the union workers of OPG, OPA & Hydro One who are getting free shares this year and for all lifetime, and the govt. workers who are part of OTPP, OMERS, PSPP etc who got most of the shares allocated prior to the IPO.


----------



## RUSH2112

blin10 said:


> so if you think bankers will get richer, then why don't you buy H and get richer too?


Firstly, the banks are doing the deal and getting paid to do it and not getting rich via shares although I am sure a lot of underhanded stuff has gone on before this IPO.

Secondly, I don't want to be a part of the new regime in charge of raising rates, to keep shareholders happy.


----------



## RUSH2112

HaroldCrump said:


> It's not the bankers that are getting rich.
> In fact, Scotiabank and Royal have a discount to the province (taxpayers) towards their customary investment banking fees for doing the bought deal.
> 
> So who is getting rich?....it's the union workers of OPG, OPA & Hydro One who are getting free shares this year and for all lifetime, and the govt. workers who are part of OTPP, OMERS, PSPP etc who got most of the shares allocated prior to the IPO.


You do realize Mr. Crump, certain groups will be looking for you with pitchfork in hand.


----------



## HaroldCrump

RUSH2112 said:


> You do realize Mr. Crump, certain groups will be looking for you with pitchfork in hand.


Why? You think I am one of the rich investment bankers?
Not at all...I am at the bottom of the food chain...an unionized private sector worker bee with no gold-plated, tax payer funded pension plan, and no free shares of Hydro One automatically deposited into my account every month.
*I* should be the one with the pitchfork.


----------



## Eder

Hopefully Hydro doesn't end up like our BRIC shares issued by supreme leader Barrett to each faithful BC lamb. I think I won't buy.


----------



## My Own Advisor

Not for me. As long as the government is a majority owner, no thanks.


----------



## james4beach

I wouldn't buy this either


----------



## gibor365

james4beach said:


> I wouldn't buy this either


What a surprise?! Like you buy anything (except GIC) at all


----------



## gibor365

My Own Advisor said:


> Not for me. As long as the government is a majority owner, no thanks.


So what?! They are monopoly in ON and cannot go bankrupt


----------



## Afp

blin10 said:


> got in at 70 cents above ipo, not bad... now lets check this thread in half a year


Thanks blin10 for your confirmation that you're in on this one.


----------



## HaroldCrump

gibor said:


> So what?! They are monopoly in ON and cannot go bankrupt


gibor, the whole thing is rigged.
Small investors are being taken for a chump ride.

This IPO is raft with financial fraud...

Just couple of examples...

*Ontario enlarged loans to unions so they could buy more shares in hot Hydro One Inc IPO*

*Pension funds wanted to buy entirety of Hydro One, Ontario minister says* 

It's not about the fundamentals of the company...it's about small investors being taken for a ride.


----------



## naysmitj

I'm sorry but the only ones being taken for a ride are the Ontario non-public sector workers, their children and their grandchildren, who will bear the cost of this Liberal government's short sighted financial planing.


----------



## Hiitsme

HaroldCrump said:


> gibor, the whole thing is rigged.
> Small investors are being taken for a chump ride.
> 
> This IPO is raft with financial fraud...
> 
> Just couple of examples...
> 
> *Ontario enlarged loans to unions so they could buy more shares in hot Hydro One Inc IPO*
> 
> *Pension funds wanted to buy entirety of Hydro One, Ontario minister says*
> 
> It's not about the fundamentals of the company...it's about small investors being taken for a ride.


Seems a little over the top? If the pension funds want to buy that's a fair indicator an individual investor might do well long term.


----------



## HaroldCrump

naysmitj said:


> I'm sorry but the only ones being taken for a ride are the Ontario non-public sector workers, their children and their grandchildren, who will bear the cost of this Liberal government's short sighted financial planing.


And the consumers -- massive rate hikes will be shoved down their throats with no respite.

Below article was written over 4 years ago, and everything in there has come true.
In fact, authors under-estimated how bad things would get.

*Get ready to pay billions for hydro pensions*


----------



## HaroldCrump

Hiitsme said:


> Seems a little over the top? If the pension funds want to buy that's a fair indicator an individual investor might do well long term.


Over the top? Those are all facts copied directly from the offer prospectus.
That document is sacrosanct when it comes to complex IPOs such as this one.

Fact that large pension funds are itching to get into this may not be a good sign, in this case, especially for consumers.
Keep in mind these are autocratic pension funds that answer to no one but their public sector union masters.

There is massive dilution coming in the next 3 years due to free shares being donated at the curbside by the province to any & all govt. union members.
There are other fundamental factors, too.

I am sure there are bullish factors as well, such as rate monopoly.

But this investment cannot be compared to a relatively safe utility stock such as Fortis, Atco, etc.
The profile is completely different.


----------



## Hiitsme

HaroldCrump said:


> Over the top? Those are all facts copied directly from the offer prospectus.
> That document is sacrosanct when it comes to complex IPOs such as this one.
> 
> Fact that large pension funds are itching to get into this may not be a good sign, in this case, especially for consumers.
> Keep in mind these are autocratic pension funds that answer to no one but their public sector union masters.
> 
> There is massive dilution coming in the next 3 years due to free shares being donated at the curbside by the province to any & all govt. union members.
> There are other fundamental factors, too.
> 
> I am sure there are bullish factors as well, such as rate monopoly.
> 
> But this investment cannot be compared to a relatively safe utility stock such as Fortis, Atco, etc.
> The profile is completely different.


I'm as pissed about the details as anyone, but I'm not convinced this won't be a good buy long term.


----------



## HaroldCrump

Hiitsme said:


> I'm as pissed about the details as anyone, but I'm not convinced this won't be a good buy long term.


It could be...my thoughts are that we can wait and see how this plays out i.e. there is no rush.
There will be many opportunities to get in over the next 2 years as the govt. carves out more secondary offerings.
Keep in mind that this IPO was for 13.5% stake - eventual target is 60% divestiture.


----------



## Hiitsme

HaroldCrump said:


> It could be...my thoughts are that we can wait and see how this plays out i.e. there is no rush.
> There will be many opportunities to get in over the next 2 years as the govt. carves out more secondary offerings.
> Keep in mind that this IPO was for 13.5% stake - eventual target is 60% divestiture.


Public sector unions are killing this province (Ontario)...I agree, wait for this to settle.


----------



## Oldroe

Did you no Hydro 1 makes 365 million dollars for the gov coffers every year. Just another brilliant move.


----------



## HaroldCrump

Oldroe said:


> Did you no Hydro 1 makes 365 million dollars for the gov coffers every year. Just another brilliant move.


Sell the cow to buy the milk - old Communist motto - works every time.


----------



## andrewf

This is an interesting debate. The conservatives are arguing in favour of continued government ownership of a utility. I am not sure there is a compelling reason for the government to own the electrical distribution utility.


----------



## HaroldCrump

andrewf said:


> This is an interesting debate. The conservatives are arguing in favour of continued government ownership of a utility


I am arguing against the corruption behind this public asset divestiture.
It is silly to call this an IPO - this is a simple transfer of assets from public ownership to private ownership by the hydro unions (OPG/OPA, H1, etc.) and public sector pension funds.

Ignoring the corruption behind this IPO is like talking past the 800 lbs. gorilla in the room.


----------



## AltaRed

andrewf said:


> This is an interesting debate. The conservatives are arguing in favour of continued government ownership of a utility. I am not sure there is a compelling reason for the government to own the electrical distribution utility.


Opposition parties almost always argue against what the government does. Ideologically, the Cons should be promoting sell off (at the right price) to the public. In Alberta, Berkshire Hathaway now owns 100% of the transmission system http://www.altalink.ca/about/company-overview.cfm AltaLink was originally sold by the government many years before that, SNC Lavalin was one of the owners back then I believe.


----------



## Eder

There's a difference between selling the entire utility or selling a non controlling interest. This deal doesn't pass the smell test.


----------



## blin10

so far it's going up nicely


----------



## CPA Candidate

The other day David Baskin was on market call and was asked about his opinion on investing in Hydro One. His comments had me doing fist pumps. 

He said that a crown corporation has a inefficient, unionist culture and would not invest in such a company. Right on David. I feel exactly the same way about Manitoba Hydro.


----------



## jaybee

I just can't look at this one. If the Ontario government was getting out of the business altogether, I'd consider it. I'm just not comfortable with the influence that the Ontario government will have; given their equity stake, and their lack of Geographic diversification. For those reasons, I'll stick with Emera and Fortis.


----------



## 1sImage

jaybee said:


> I just can't look at this one. If the Ontario government was getting out of the business altogether, I'd consider it. I'm just not comfortable with the influence that the Ontario government will have; given their equity stake, and their lack of Geographic diversification. For those reasons, I'll stick with Emera and Fortis.


You just sit back and let me make the money then...


----------



## jaybee

1sImage said:


> You just sit back and let me make the money then...


Calm down there champion. I'm not saying you've made a bad investment...

Make no mistake...I love this business, but I'll stick with Emera and Fortis. I've owned both for over a decade, and they're unencumbered...not in bed with government. Makes me feel more comfortable.

Nobody is going to lose money on Hydro One..don't get me wrong. But I'll stick with the guys that have geographic diversification, and autonomy.


----------



## blin10

jaybee said:


> I just can't look at this one. If the Ontario government was getting out of the business altogether, I'd consider it. I'm just not comfortable with the influence that the Ontario government will have; given their equity stake, and their lack of Geographic diversification. For those reasons, I'll stick with Emera and Fortis.


take a look at the price of fts and ema when they ipo'ed... H has a good chance of making it to 25 in short term and doubling in the years to come... it is up $2 already from like 2 weeks ago


----------



## james4beach

As of yesterday's close, Hydro One now trades *below* its closing price from its first day of trading.


----------



## blin10

james4beach said:


> As of yesterday's close, Hydro One now trades *below* its closing price from its first day of trading.


and what's your point? H has only been trading a month... take a look at facebook stock, it traded below ipo price and take a look at the graph (and that's facebook, I would never invest in something like that)


----------



## pastorash

H up about 10% from the IPO price. Wondering what people may be thinking about it now that it's had a bit of a chance to breathe on the open market for a few months. Was considering initiating a position. Long term dividend investor.


----------



## james4beach

Do you believe that Hydro One has good likelihood of a better total return than the TSX Composite? That's the important question. Is it worth buying H instead of XIC ? The dividend should not factor into that decision (both H and XIC pay dividends, by the way)

I don't have a strong reason to believe that it would


----------



## Eclectic12

blin10 said:


> and what's your point? H has only been trading a month...


The future is what matters ... TD bank made a fortune spilling off 12.4% of TD Waterhouse Canada for $35.28 then two years later did a force buyout for $9 a share. Nothing says the Ontario gov't couldn't make the same move, if the market lines up with it.

Question is ... does lower trading mean a blip or a more realistic valuation?


Cheers


----------



## 1sImage

Hitting $24 today....


----------



## yyz

Sure but it's also running up to ex div date as well right?That has some impact .Was just listening to a guy from Mawer on BNN talking about it.They own it,would like to add to it if the price comes down a bit on another offering.Still a reasonable less volatile stock to own


----------



## yyz

Secondary offering up to just over 83M more shares at $23.65


----------



## blin10

im up big on this thing, buying more today, got a good feeling about this in 1-3 years


----------



## Eclectic12

blin10 said:


> and what's your point?
> 
> H has only been trading a month... take a look at facebook stock, it traded below ipo price and take a look at the graph (and that's facebook, I would never invest in something like that)


Question is ... will it follow the ones you have listed or follow TD Waterhouse Canada stock that spent far more time under the IPO price before TD bank bought it back in a forced buyout (see post # 114)?

I suppose too, another key question is what similarities you see between FB and H that makes a similar stock price trajectory what you see? 

Cheers


----------



## yyz

You think the government can afford to buy it back?They need the money to spend .I'm surprised they haven't IPO'd the liquor stores yet,I suppose that may be next .


----------



## Eclectic12

Buy it back or not ... the main point is that some stocks have traded well under the IPO for extended periods.

Personally, with right numbers ... I don't see how the gov't could lose as they can tell the public it's a great asset to own and how money was made for nothing.


As for the liquor stores, maybe - it certainly has been talked about at various points.


Cheers


----------



## blin10

Eclectic12 said:


> Question is ... will it follow the ones you have listed or follow TD Waterhouse Canada stock that spent far more time under the IPO price before TD bank bought it back in a forced buyout (see post # 114)?
> 
> I suppose too, another key question is what similarities you see between FB and H that makes a similar stock price trajectory what you see?
> 
> Cheers


if you going to over think like that you will miss out on a lot of money... with your logic you can make any stock look like a bad buy


----------



## donna9

I really missed this one and it pains me. Had an issue with not having enough (minimum) to get involved. I guess i could have but i just had hesitations until it was too late.
Ah well. Just nice to be able to finally get involved with ipos now.


----------



## Eclectic12

blin10 said:


> if you going to over think like that you will miss out on a lot of money... with your logic you can make any stock look like a bad buy


Is it better to assume the tech company IPO chart sets what an electrical generating company charts will be?

I'd rather base it on the company and/or investor sentiment.


Cheers


----------



## blin10

strong performer in a weak market right now...


----------



## 1sImage

Just ripping past $25 a share, gonna be $26 soon!


----------



## blin10

1sImage said:


> Just ripping past $25 a share, gonna be $26 soon!


I didn't want to do it but had to sell 1/4 of my position, have to lock in some profits... Have a feeling it'll be $30 by december


----------



## OnlyMyOpinion

?
_The government says it has reached an agreement in principle with the province's First Nations to loan them up to $268 million to buy up to 15 million shares at $18 per share. That is above the province's book value, but below the $24-to-$26 range the stock has been trading in recent months.
For the deal to go through, at least 80 per cent of the band councils will have to approve the agreement by the end of next year.
If ratified, Ontario would sell the shares to a new investment vehicle owned collectively by First Nations and provide seed capital of up to $45 million over three years.
Energy Minister Glenn Thibeault says in a statement that this would give economic development opportunities to First Nations across the province.
Thirty per cent of the utility's shares have already been sold, and if 15 million shares are sold to the First Nations, it would represent another 2.5 per cent._
http://www.cbc.ca/news/canada/toronto/first-nations-hydro-one-deal-1.3675165


----------



## 1sImage

So let me get this straight. They're borrowing enough money to buy 15 million shares at and almost $8 below share price that is now. And they need a FULL YEAR to think about it????

Well when the share price goes to $28 a share, thats a $10 per share increase of 15 million shares right out of the box... A 150 million dollar let me think about this PROFIT.

You can't make this stuff up!!!!


----------



## gardner

http://www.cbc.ca/news/business/hydro-one-avista-1.4213159



> Hydro One Ltd. (TSX:H) has signed a friendly deal to acquire U.S. energy company Avista Corp. for C$6.7 billion in an all-cash deal that would create one of the largest regulated utilities in North America.


They also have issued $1.4B in 4% debentures convertible at $21.40, presumably to help pay for Avista. I signed up for a few K of the debentures.


----------



## kcowan

I think the debenture rate is especially low considering that interest rates are rising. Is it worth the effort to get the quick flip of $1/share?

Here is an analysis stating that it is essentially an extended option to buy at $21.40 if the acquisition proves to be accretive.


----------



## gardner

A little low, but 4% is not totally unreasonable to park some cash, IMO considering that I was salivating over the 3.25% at Oaken.
Whether the conversion price is good or not depends on what happens after the Avista close. It's possible that they will not be "in the money" at all. I think of it like owning a call option.
In any event it seems that it was over-subscribed since I only got a partial allocation.


----------



## blin10

i like this one, been in and out many times, still holding some for long term...


----------



## james4beach

Lets check back on Canada's largest IPO since 1999.

By my charts, the total return since the first day of trading is +3.49% (which includes dividends) and works out to 1.39% annualized return over these 2.5 years. A quick comparison for this time period:


*Stock/index**CAGR total return*Hydro One1.39%ZUT (utilities sector)8.16%XIU (TSX 60 index)8.69%

H is doing significantly worse than the utilities sector. By the way, ZUT is an equal weight sector ETF that holds some H.



gibor365 said:


> james4beach said:
> 
> 
> 
> I wouldn't buy this either
> 
> 
> 
> What a surprise?! Like you buy anything (except GIC) at all
Click to expand...

The GIC has had a higher return than Hydro One in these 2.5 years. About 2.2% CAGR for the GIC and just 1.39% for H.


----------



## hboy54

james4beach said:


> Lets check back on Canada's largest IPO since 1999.
> 
> By my charts, the total return since the first day of trading is +3.49% (which includes dividends) and works out to 1.39% annualized return over these 2.5 years. A quick comparison for this time period:
> 
> 
> *Stock/index**CAGR total return*Hydro One1.39%ZUT (utilities sector)8.16%XIU (TSX 60 index)8.69%
> 
> H is doing significantly worse than the utilities sector. By the way, ZUT is an equal weight sector ETF that holds some H.
> 
> 
> 
> The GIC has had a higher return than Hydro One in these 2.5 years. About 2.2% CAGR for the GIC and just 1.39% for H.


You should compare the GIC against my holdings in GE. This REALLY makes the GIC look good.

So congrats on missing the dog called H. I'd just like to point out that one avoided equity mishap does not in any way make a case for GICs. 

My CAGR on the entire portfolio the past 2.5 years is WAY over 8%.

I don't know how much your reasoning for the permanent portfolio is your fearful nature, and how much is your job and country location factors. If mostly the latter, I frankly suggest that now that you have a NW of about 1/2 million dollars, the longer you allow those factors to dominate your investing approach, the weaker your lifetime investing performance is going to be. I would argue that you should get your backside back into Canada and take some equity risk appropriate with your age. Also, you are quite right when you argue that someone like me can take larger risks knowing that medical care, welfare etc. will in the end backstop me if it all goes to feces. You are giving up substantial investing advantages by remaining in the USA, advantages that I have successfully exploited for decades now.

hboy54


----------



## gardner

There was a story in Washington that the Avista deal was okay'd there, but with Idaho , Oregon , Montana and Alaska still ongoing. I assume that conclusion of Wash. is a good sign. Presumably they are handling the states concurrently with most of the small players holding out to see what Wash. and Ore. would do. While H has been a dog for the past year, some of that is likely to be apprehension about Avista. For me the biggest fear is Ford mouthing off about turning the whole thing upside down. ATM I am only holding H.IR receipts that are earning 12% so it's not that painful.


----------



## gardner

Any thoughts on the ouster of the entire board and CEO today? Ford seems determined to wipe out any value in H. I would be reluctant to hold it at this point.

http://www.cbc.ca/news/canada/toronto/doug-ford-hydro-one-1.4743097



> Hydro One's CEO is retiring as part of an agreement between the Ontario government and the utility company that will also see the replacement of all board members.


I would be astonished if this does not wind up costing H and the province millions. It is hard to see how the uncertainty will improve the stock price.


----------



## gardner

Seems possible that the Avista deal will fall through now, since that was driven by the old board. I'll get my instalment receipt money back.

https://finance.yahoo.com/news/hydro-one-board-turmoil-adds-160946472.html


----------



## gardner

> Hydro One takeover of Avista scrapped by Washington State over Ford's political 'interference'


https://www.cbc.ca/news/canada/toro...rs-reject-hydro-one-avista-takeover-1.4934282

I guess they will be redeeming the subscription receipts, then.


----------



## AltaRed

That was the dumbest move ever anyway. It made no corporate sense.


----------



## doctrine

"Evidently showing up in a clown suit,with $4 Billion in borrowed money is no longer enough to buy you an American utility."

-Catou1403 on Globe and Mail comments.

Fortis pulled this off spectacularly with the acquisition of the largest independent multi-state electrical distribution utility in the United States, ITC. Emera has had okay success. Altagas totally blew up with the WGL acquisition. Hydro One didn't even make it to serious review hearings. This strategy of US utility acquisition makes a lot less sense with the Canadian dollar at 75 cents. Fortis and Emera were buying at 90 cents+. 

Hydro One should either go 100% to the markets, or be bought back 100% by the government. The 50-50 model has not been successful.


----------



## newfoundlander61

Looks like a good stock to buy today.


----------



## humble_pie

newfoundlander61 said:


> Looks like a good stock to buy today.



yikes i hope it's not too late ... newfoundlander u rarely make a wrong move but this is not a good idea

just upthread you can see the forum's brightest & they are dissing hydro one. Meanwhile you have recently told us you are investing in individual stocks for the very first time, using proceeds from recent home sale.

the background right now is recent market peaks descending now into scary times. These are not good times to be buying an IPO. Me i don't believe any novice investor should buy IPOs period. Certainly not in scary markets featuring loud background dissing music.


----------



## newfoundlander61

As a follow-up I currently only hold TD; BNS, & RY for stocks. Only 16% of my money invested, rest in cash currently. Have been looking at MRU recently. After the post I had another look and decided it was a good day to go out and do some photography and stay on the sidelines. Trying to slowy move in but so far its a snails pace  Planning a cruise with the wife once it gets nice a cold to the Carribean.


----------



## Dilbert

I hold some Hydro One, but a very small amount. I certainly would not buy more because as we have seen, the company can be manipulated by the government. A recipe for disaster IMHO.

Maybe have a look at IPL?


----------



## newfoundlander61

Thanks for the post and input, worth taking a peak at.


----------



## humble_pie

here are a few reasons why i believe common stock IPOs should be viewed very warily:

1. Owners do not normally sell during good times, when a company's performance is gold star. There's no reason for an owner to take on all the public investor reporting hassles plus all the regulators' rules hassles, when revenue/profits are rising. There's no reason for an owner to be willing to share profits with strangers.

on the contrary, most companies sell to the public in an IPO at a time when they deem their enterprise to be entering a plateau or even a down period. It is the retail buyers who then assume the less favourable circumstances.

2. A situation to be aware of, possibly stay away from, is when a company's bank thinks the corporate debt is too high. The bank's underwriting division then assists in an IPO in order to raise $$ to pay down debt, thus transferring the risk to the IPO buyers. One should always check to see if the corporate banker is also the lead underwriter. It's common that a company's bank will be among the underwriting group; but serving as lead or sole underwriter of an IPO is a negative signal imho.

3. Although it's extremely rare, it does happen sometimes that a high quality, profitable company goes public in an IPO because the founder entrepreneur is retiring & finds that underwriters are willing to pay more to buy his company in a "bought deal" than he could raise himself by selling to another private investor. These rare but valuable common stock IPOs are known as "hot" issues.

the problem is that small retail investors cannot hope to receive any of the IPO shares. At least 80% of a "hot" IPO will always go to institutional investors.

the remaining 20% will go to retail brokers; but it is the full-service brokers who will have first dibs; & the full-service brokers will be grabbing as many shares as they can get their hands on for their best & most profitable clients.

discount brokers will either receive no allocation whatsoever, or else a tiny token allocation that is sometimes as small as 100 or 200 shares for the entire discount brokerage.

a broker that does serve the IPO market is TDDI. For a "hot" issue, TD the discount side might receive only 100-200 shares as its total allocation. The big green does have an ethical distribution system for that tiny handful of shares. Anyone who has taken part in a "hot" IPO at the TD knows the drill, so i won't explain here how-it-works other than to say it boils down to only the first 2-5 clients who have placed an "expression of interest" in the hot IPO might receive a micro-allocation of a few shares. Everyone else on that list will receive nothing.


----------



## golfdude

Down 10% now since the initial Avista merger rejection only 3 weeks ago. FTS also down nearly as much. Seems overblown that these quasi-annuity "safe" stocks are getting taken to the woodshed so badly since L-T rates have been going down. Certainly not behaving like widows and orphans stocks. I don't know if its the result of index-investing or whether investors in "safe" stocks are super-weak hands in the face of broader volatility.


----------



## AltaRed

golfdude said:


> Certainly not behaving like widows and orphans stocks. I don't know if its the result of index-investing or whether investors in "safe" stocks are super-weak hands in the face of broader volatility.


Widow and orphan stocks have a lot of movement too. The reference is mostly to reliable income and a relatively narrow trading band, e.g. +/- 15% perhaps. I suspect index funds definitely have a role to play in things like FTS drifting lower, and remembering that portfolio managers likely don't shift their holdings near as much as the retail investor. This too will pass. I am not at all fretting about my blue chip holdings albeit like I said in an earlier post, I don't consider Hydro One a blue chip stock. It is a sterile mule, stuck somewhere between a private sector horse and an *** (government ownership).


----------



## james4beach

Utility stocks are still stocks. Expect them to be as volatile as stocks in general... stocks are highly volatile creatures that can (and do) swing around like crazy, even if they are reliable businesses.

The 1 year return of ZUT (utilities) is -8.46% versus -11.07% for the TSX Composite. So utility stocks have performed significantly better during this rough market.


----------



## gardner

They're cashing out my instalment receipts...

https://www.hydroone.com/newsroom/cnw-article#?articleId=123029



> Hydro One announces Redemption of Convertible Debentures Represented by Instalment Receipts
> 
> On redemption, holders of Instalment Receipts will receive $333 per $1,000 principal amount [ ... ] plus accrued and unpaid interest


----------

