GFL lockup set to expire with shares hovering below IPO price

A lockup associated with GFL Environmental Inc.’s initial public offering is set to expire ahead of today’s trading session with the shares in a recent slump, reports Bloomberg.

GFL sold 75 million subordinate voting shares in its initial offering in March, valuing the company at $5.9 billion. The Vaughan, Ontario-based trash hauler lowered its IPO price when investors balked at its debt load and questioned its growth prospects. The deal also took place in the early days of a market selloff sparked by the COVID-19 pandemic.

According to Bloomberg, the company has been on the defensive since becoming a target of New York-based Spruce Point Capital Management LLC, which questioned GFL’s accounting and an “aggressive and opaque business model” that includes frequent acquisitions.

Patrick Dovigi, GFL’s chief executive officer, called the Spruce Point report “misleading,” while lead independent director Dino Chiesa publicly voiced support for GFL’s management on Aug. 25.

“No one has any intention to sell any stock at the expiration of the lockup,” Dovigi told Bloomberg.

Spruce Point alleged that “Dovigi and others have used margin loans tied to the value of GFL’s stock,” and saw a risk of stock sales after the lockup period ends.

GFL’s stock has fallen 12 percent since Spruce Point released the report Aug. 18 and closed last week at $18.67 in New York. The IPO was at $19.

Jefferies analyst Hamzah Mazari, who has a buy recommendation on the stock, says he isn’t concerned about the event given the presence of large shareholders including Ontario Teachers’ Pension Plan, which has 16.2 percent of GFL. According to Mazari, the risk of private equity players selling is “low." 

BC Partners Advisors LP, Ontario Teachers’ and Singapore’s GIC Pte Ltd. own a combined 47 percent of GFL’s subordinate voting shares, according to data compiled by Bloomberg.

Private equity can wait until 2022 or 2023 “before fund life is an issue in terms of getting out of investment,” Mazari said. He also noted GFL’s stock discount to peers including Waste Connections Inc., Ontario, Canada, and Casella Waste Systems Inc., Rutland, Vermont.