Geoffrey Morgan
Fri, November 10, 2023
(Bloomberg) -- Bank of Montreal, Royal Bank of Canada and others have been left holding millions of Crescent Point Energy Corp. shares after leading a C$500 million ($362 million) equity raise that failed to win widespread institutional investor support, according to people familiar with the matter.
Calgary-based oil and gas producer Crescent Point issued 48.5 million shares this week at a price of C$10.30 each to finance its C$2.6-billion acquisition of Hammerhead Resources. The banking syndicate led by BMO and RBC still holds about 25% of the shares offered, the people said, asking not to be identified as the information isn’t public.
That would imply the banks in the syndicate collectively are holding about 12.1 million shares in Crescent Point that they haven’t been able to sell this week, worth about C$118 million at current prices, according to Bloomberg calculations.
The acquisition and a concurrent drop in oil prices, caused Crescent Point shares to fall 9.9% on Tuesday. The stock is down 13% on the week and trading at $9.74 as of 3 p.m. in Toronto, below the price where the shares were offered.
The number of shares held by the banks could change and they could still find buyers for the remaining stock, the people said. BMO and RBC didn’t respond to requests for comment on the status of the shares they underwrote. Crescent Point didn’t respond to a request for comment.
Analysts on Wall Street and Toronto’s Bay Street remain restricted on the stock even though the equity raise closed Friday morning.
Crescent Point’s capital raise is widely seen as a victim of the week’s drop in oil prices.
“The reaction to the share price is bad timing as opposed to a bad deal,” Ninepoint Partners senior portfolio manager and partner Eric Nuttall said by phone, noting that oil prices fell by $2 a barrel as the deal was announced. Ninepoint is Crescent Point’s third-largest shareholder.
Nuttall expects the syndicate will ultimately be able to sell the Crescent Point shares as the merits of the deal are communicated to investors.
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