Investors snub Ballard deal

Source:Globe & Mail
Publication date: 24-Jan -2003
 

There's a lesson to be learned in every deal that goes wrong.

In the case of a poorly received bought deal from Ballard Power, the lesson is that investors believe what a company says, not what it does.

In early December, cash-strapped Ballard sold equity to its auto maker backers, DaimlerChrysler and Ford. After that infusion, the fuel cell maker's executives told the world that they didn't see any further need to raise capital. All's well to this point.

The next day, one or two of Ballard's institutional investors apparently approached the company and said they'd be willing to buy more shares and increase their holdings. Ballard decided that one can never have too much cash. It approached the Street to test interest in a financing.

The dealers tested the waters and committed to a deal. RBC Dominion Securities and CIBC World Markets led a six-dealer syndicate that agreed to sell 7.7 million shares for $20.25 a pop, putting about $150-million in the company's coffers. Here's where things got ugly.

Most investors didn't want to put more money into a company that said it didn't need any. About three million Ballard shares didn't sell, and the stock began to sink.

This week, each dealer in the syndicate selling Ballard was given their portion of the remaining shares, to dispose of as they please. The stock closed yesterday at $14.85 on the Toronto Stock Exchange, up 50 cents on the day.

Even with the commissions they made on the shares that did sell, the Ballard selling syndicate is down more than $10-million on this bought deal. That's a steep price to pay to raise money for a company that said it didn't even need it. 
 

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