There’s a new trend developing in Canadian technology, and it ain’t happening in Atlantic Canada.
This is the year of the tech initial public offering in Canada, with companies like Shopify, Hootsuite, Stingray and Vision Critical likely to list their shares on public markets. In an IPO, a company selling shares on a stock exchange for the first time after a rigorous regulatory approval process.
These companies are generally more advanced than any Atlantic Canadian startup, so it’s not fair to criticize the East Coast startups not joining in the party. But it is fair to question why virtually no startups in the region so much as discuss plans for an IPO, and why the people overseeing the ecosystem don’t include public listings in their long-range planning.
Here are the tech companies creating a genuine buzz in Canada’s public markets these days:
- Shopify – the Ottawa-based ecommerce phenom this month filed for a $100 million IPO on the New York and Toronto stock exchanges. The banks leading the offering are Morgan Stanley, Credit Suisse Group and RBC Capital Markets.
- Stingray Digital Group – The business-to-business music provider, said on Friday it plans to list on the TSX. Media reports indicate it aims to raise about $120 million. The lead bankers are National Bank Financial, GMP Securities and BMO Capital Markets.
- Hootsuite Media – The Wall Street Journal has reported that the social media analytics platform is considering an IPO. Its latest venture capital funding reportedly valued the company at about $800 million.
- Vision Critical – The Vancouver consumer intelligence software provider is reportedly working on an IPO. The Globe and Mail recently reported the company could be valued at $500 million in the offering.
What’s disturbing is that the letters I, P and O rarely pass the lips of startup founders in Atlantic Canada. The few (and I can count them on one hand) founders that talk about public listings seem more intrigued by a Capital Pool Company listing, that is getting on the stock exchange through a reverse takeover of a listed shell company.
Listing through a CPC is a bit like buying your wedding dress at Kmart. It’s functional, but it’s not going to wow anyone who matters. All four companies mentioned above are listing through IPOs. That means they’re going through the full regulatory process, will be championed my major banks and will meet with the leading analysts and institutional investors in tech and small-cap stock categories.
A CPC listing is not going to get the same attention, which means the stock will not get the same distribution when it lands on a stock exchange.
That might not matter if Atlantic Canadian startups were lacking in ambition. But these companies are ambitious. Their stated goal is to establish tech companies (note the plural) in Atlantic Canada with billion-dollar valuations.
This community has spent the last five years convincing venture capital investors across the continent that Atlantic Canada is home to some great startups. Now the time has come to start over and educate three groups of the same thing – tech investment bankers (like those doing the Shopify and Stingray deals); tech analysts; and institutional investors specializing in small-cap and tech stocks. This is a completely different community from VC and it needs some attention. Five years from now, there may be a few East Coast companies that will appreciate it.
Entrevestor receives financial support from government agencies that support start-up companies in Atlantic Canada. The sponsoring agencies play no role in determining which companies are featured in this column nor do they have the right to review columns before they are published.
