Canadian awakening: IPOs hit 15-year high

August 2021 | FEATURE | CAPITAL MARKETS

Financier Worldwide Magazine

August 2021 Issue

Having largely lain dormant over the past 15 years, initial public offering (IPO) activity in Canada exploded into life in 2021, the resurgence fuelled by surging equity markets and a blossoming technology sector.

According to Bloomberg, so far this year 32 Canadian firms have announced IPOs, raising a combined total of $3.26bn. This is more than 10 times the $305.2m of deals announced by this time in 2020, and the most since 2006, when $3.58bn of IPOs were announced.

“Canada has very vibrant technology and start-up communities that have performed very well, especially in recent months,” says Navaid Mansuri, chief financial officer at Dialogue Health Technologies. “The entrepreneurship culture, particularly in Montreal and Toronto, allows for the continued growth of a modern and technological economy across the country.”

Also driving the considerable uptick in investment in 2021 is the development of artificial intelligence (AI) technologies and the support these have received from federal and provincial governments in recent years (such as the $125m Pan-Canadian AI Strategy) – investment that is doing much to benefit both local and multinational Canadian enterprises.

“The surge of IPOs in the first half of this year is due, in large part, to the activity that occurred in 2020 and in the years prior, reflecting a maturation of companies in the capital market pipeline,” explains Andrea Brewer, a capital markets partner at Norton Rose Fulbright. “Home-grown Canadian companies have invested in keeping their talent in Canada and basing their global operations here. We have seen so many successes across many industries, but especially in the technology sector.

“There has been thoughtful incubation and pride in the Canadian start-up and tech industry going back over a decade now and Canadian entrepreneurs are able to build companies here to compete on a global level,” she continues. “It has taken time, but the frenzy of activity in the market now is due in no small part to the ‘coming of age’ of a number of companies that have been fostered by private investors and creative founders over the past number of years.”

IPO pipeline

Among the significant IPOs launched in 2021 are those by technology solutions provider Softchoice Corporation and global provider of e-commerce and FinTech solutions Logiq, as well as Organigram Holdings, Lightspeed POS and Nuvei – all of which are indicative of the current wealth of activity in the Canadian FinTech and payments space.

“Given the extent of the activity seen over the last year, it would appear that the Canadian IPO market is well-primed to continue on its current trajectory.”

“This is natural given that we are at a very exciting inflection point revolutionising the way that commerce happens on an individual and macro level,” says Ms Brewer. “Companies recognise that, even in the height of a global pandemic, Canadian markets are poised to assist with complex offerings, to raise capital and to succeed.

“The issue was never about demand in the deal pipeline, but rather about supply in terms of the number of companies that are now primed to make a public offering,” she continues. “Recent successes reaffirm that Canadian companies can be global players, which should help ensure that the pipeline of companies that are ready for a public listing will remain strong in the coming years.”

According to Mr Mansuri, the key to this strength is the encouragement given at governmental level. “Federal and provincial governments have put in place significant programmes to support the growth of local economies across the country,” he vouches. “The fact that Canada has a pool of highly educated professionals further contributes to the emergence of Canadian companies in Canada and abroad. Proceeds from an IPO allow a company to further strengthen its leadership position and expand its service offerings to provide the best care to its customers.”

Future trajectory

Given the extent of the activity seen over the last year, it would appear that the Canadian IPO market is well-primed to continue on its current trajectory. The appetite for e-commerce and expansive tech offerings is likely to be further heightened in a new post-pandemic reality.

Indeed, the general expectation among practitioners is that all the changes that individuals and companies have been forced to grapple with over the past year will lead to further innovation and drive solutions for new and better ways of working and living.

“The Canadian capital markets will want to ensure that the IPO market continues to be accessible to companies that are at the right stage of development to succeed,” notes Ms Brewer. “Given the wealth of activity over the past year, many market participants now have some significant IPOs under their belts and this exciting trajectory shows no signs of slowing down.”

Fraser Tennant