How market realities have tossed a wrench into Telus’s spinout plans

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The $1.36-billion spinoff of subsidiary Telus Digital Experience was supposed to pave the way for similar stock debuts, but feeble stock performance has complicated the plan

Telus subsidiary Telus Digital Experience's IPO brought in a $1.36-billion stock sale. While the company went public in 2021 at US$25 a share, it's share price has dropped and closed at $4.65 on the Toronto Stock Exchange.

The CEO now faces a dilemma. A decision that makes all sorts of financial sense – buying back all the shares in Telus Digital for a fraction of the IPO price – would kibosh Mr. Entwistle’s plans for further spinouts. Why would anyone buy the next IPO from Telus after watching investors lose money on the last offering?

When pressed on his intentions for Telus Digital, the normally decisive Mr. Entwistle has equivocated. In an early August conference call, the CEO said: “Whilst we obviously have a fiduciary obligation to keep all of our options open, explicitly, it is not our intention to privatize Telus Digital.” Telus took its digital division public by first selling a stake to institutional investor Baring Private Equity Asia in 2016 – winning independent endorsement of the division’s value – then staging the IPO in 2021. In August, Mr. Entwistle said he plans to roll out the same game plan for Telus Health and Telus Agriculture and Consumer Goods – two other divisions built though a series of acquisitions over the past two decades.

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