Magnet Forensics investor In-Q-Tel, as well as executives including founder Jad Saliba and CEO Adam Belsher, have sold $74.4 million CAD of shares in a secondary offering that closed December 14.
Saliba and Belsher sold a combined 900,000 subordinate voting shares, through holding companies controlled by them. Magnet investor In-Q-Tel, which is a not-for-profit strategic investor that has also invested in the likes of D-Wave, sold all of its 431,814 subordinate voting shares and no longer holds any shares in Magnet.
The remaining shares were sold by holding companies controlled by other members of Magnet’s management, including Angelo Loberto who serves as CFO and COO.
The bought deal offering included 2,456,814 subordinate voting shares overall, sold at a price of $30.30 per share. The selling shareholders received the combined gross proceeds of approximately $74.4 million.
The underwriting syndicate consisted of Canaccord Genuity, BMO Capital Markets, National Bank Financial, RBC Capital Markets and CIBC Capital Markets. The underwriters were granted an over-allotment option that could increase the total size of the offering to approximately $85.6 million.
Toronto Stock Exchange (TSX)-listed and launched in 2010, Magnet offers a digital investigation software that acquires, analyzes, reports on, and manages evidence from digital sources, including computers, mobile phones, IoT devices, and cloud services. Magnet claims over 4,000 public and private sector customers in over 90 countries.
Magnet’s principal shareholders are Saliba, Belsher, and retired Research in Motion (Blackberry) co-CEO and chairman Jim Balsillie, who was Magnet’s first investor.
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Following the sale of subordinate voting shares, the trio still owns or controls essentially 100 percent of multiple voting shares, representing 96.2 percent of the total voting power of Magnet’s issued and outstanding shares. As the founder, Saliba holds around 40 percent of multiple voting shares, with Belsher owning 38 percent and Balsillie owning 21 percent.
The sale of shares follows Magnet filing a prospectus in October where it stated plans to raise $950 million through various offerings during a 25-month period. According to Magnet, it intends to use the funds generated for financing flexibility. The startup also noted in its prospectus that it plans to consider strategic acquisitions.
Magnet has acquired three companies in its history. Most recently, it bought United States-based video and multimedia evidence solution company DME Forensics in a deal worth $9 million, marking Magnet’s first acquisition since it went public.
To finance its plans for growth, Magnet also entered into an amended and restated credit agreement with the Royal Bank of Canada in October, establishing a $30.9 million CAD ($25 million USD) revolving committed credit facility. The company previously held a $5 million CAD demand credit with RBC.
In April, Magnet increased its initial public offering on the TSX raising its target by $10 million. Upon closure of the IPO, Magnet raised $115.1 million CAD which includes the over-allotment option exercised in full.