ROOTS IPO – Completely over-valued

Roots (TSX: ROOT) went public today. Look at the chart!

The only shock I have at today’s market reaction (it is trading down $2 from its initial price of $12/share) is how the institutions managed to find enough buyers at $12 to actually complete the sale. That was one heck of a sales job considering that anybody that is able to read a financial statement (do any financial institution managers ever read these prospectuses anymore??) would steer clear of this one. It isn’t even close in my estimation.

Conclusion: Another money-losing, negative book-value entity that has a huge uphill climb if it is to ever return any dividends to shareholders. I even love the $20 million distribution on May 2017 that Searchlight took out of the company before going public even though they were pushing the top of their credit limit (which was expanded on April 19, 2017). Will Roots go into creditor protection in a couple years?

There are some IPOs that make me think and wonder whether they’re worth purchasing (at least they’re worth the research). This one is an easy, easy pass.

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