Farmers Edge share offering oversubscribed

With the ability to more easily raise money from markets compared to when it was a small private company, Farmers Edge will be better able to compete with giant rivals like John Deere and Bayer. | Screencap via farmersedge.ca

Farmers Edge wants to use the money and new structure gained through its initial public offering to better reach the non-digitally-integrated farmer population.

With the ability to more easily raise money from markets compared to when it was a small private company, Farmers Edge will be better able to compete with giant rivals like John Deere and Bayer.

“It really leaves us with a clean balance sheet and dry powder to go out and really grow the business at a time when digitalization is really happening at a rapid pace in agriculture,” company chief executive officer and co-founder Wade Barnes said during a news conference marking the conclusion of the initial public offering (IPO).

“We are truly the only independent player that helps farmers, guide(s) them towards decisions and moving towards really positive outcomes.”

An IPO is when a private company decides to make at least some of its ownership publicly traded, which means an ownership stake is broken into shares that can be bought and sold by investors.

Farmers Edge both took in new money with the initial share offering and has been able to convert some previous investments into shares.

With the new money Farmers Edge intends to push out much wider its one-year-free program, which lures farmers into the Farmers Edge “ecosystem” by letting them see what it can do with them.

It will also hire more staff in the six countries in which it now operates.

The IPO was massively oversubscribed, which means that people wanted to buy many more shares than were available when they were first released.

Company chief financial officer David Patrick estimated as many as nine orders were put in for every one share that could be sold through the IPO.

That reveals Farmers Edge as a beneficiary of the present market mania for tech companies, which Farmers Edge is now seen as by many investors. The stock bull market and the desperation of many to find returns in the market during a time of near-zero interest rates has propelled interest high in many small and start-up companies.

The Farmers Edge IPO also came to market after much of the furore over the GameStop speculative frenzy and short squeeze had subsided, allowing investors to focus on other companies.

Farmers Edge doesn’t make money. Like many tech companies trying to grow quickly, it has been burning through cash as it attempts to reach a big enough size to begin spinning off profits. So far it has lost more than $360 million as it tries to build up enough bulk and momentum to become an industry-dominant player.

For that to happen, it thinks it needs to manage at least around 40 million acres, which is its short-term target. That would almost double its present acreage.

The company raised $125 million in its IPO, which saw the initial share price soar more than 17 percent once shareholders could trade their newly minted shares. That price of $17 was at the top of the range that CIBC and National Bank, the offering’s sponsors, had initially pegged as possible, and much better than the $10 bottom of the range.

After beginning as a variable rate technology service provider for farmers’ fertilizer use, Farmers Edge has pushed into a broader range of services, and is courting third party providers of services like insurance, which can use the Farmers Edge platform.

The reason investors see such potential in digital ag providers is that artificial intelligence and machine learning are likely to make platform-based farm management central to most farms of the future. The owners of the dominant platforms will likely be in a commanding position.

Barnes recognized that view at the news conference.

“It’s about creating that ecosystem that creates value,” said Barnes.

“We believe that data-driven decisions will always outperform human-made decisions…. When farmers utilize data-driven technology like artificial intelligence or predictive modelling, it’ll completely change how farmers farm and certainly change how they interact with agricultural businesses they partner with.”

Farmers Edge is working with Google and other digital providers for some of its services.

About the author

Markets at a glance

explore

Stories from our other publications