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Canadian IPO Market Decline and Potential IPOs

August 23, 2023 9:46 am
Published by: David Richardson

Over the past year, the IPO market in Canada has been on a declining trajectory, especially in the fintech sector.

The first half of 2023 saw only 34 IPOs going live, totalling $172 million of funds. If the year continues at the same pace, the estimated yields would be around $340 million—rendering 2023 the worst Canadian year in terms of IPO performance.

The previous weakest year was 2016, and even then, Canadian IPOs yielded $799 million, so you can see the substantial drop 2023 is witnessing.

The Canadian IPO market has always lacked the risk embracement factor that seems to define the American market. However, there were always enough investors showing interest in potential IPOs. Now, the number of private companies willing to go public has substantially decreased, raising concerns about a looming recession.

Here, we’ll discuss Canadian private companies potentially going public and the reasons the IPO market in Canada is going south.

Private Canadian Companies Potentially Going Public

Some experts expect the Canadian dry spell to end by late 2023 or early 2024. However, the number of private companies planning to go public doesn’t offer any reassurances. Only a handful of companies are throwing words about potential IPOs, and nothing official has been announced.

Here are a few private Canadian companies that may potentially go public soon:

Hootsuite

A Vancouver-based company, Hootsuite is a social media management tool that offers planning and scheduling features. A couple of years ago, Hootsuite planned to go public on the TSX, particularly in late 2021. Back then, the plan was to raise $200 million to give the company enough funds to make it into the social commerce sector.

However, the company failed to meet its original timeline, partially because many Canadian tech IPOs went south during the year, and the average return was lower than expected.

Reportedly, Hootsuite didn’t completely shut off the plans of going public; it merely delayed it with no announcement date in sight.

Whether the IPO will happen this year is debatable, but we believe it’s a far shot. However, we believe it’ll happen sooner or later, depending on the tech market’s IPO performance.

Flair Airlines

Nicknamed Canada’s low-fare airline, Flair is based in Edmonton. The low-cost company operates domestic and North American destinations, and it’s been in the line for an IPO for a while now.

The airline is reportedly exploring a possible merger with Vista Acquisition Corp., a publicly-traded investment company.

Although a merger will take the company public and boost its funds, the possibility raises some red flags because of Canadian ownership rules.

The Florida-based investment company, 777 Partners, owns 25% of Flair Airlines. According to Canadian law, foreign entities can only own up to 49% of Canadian commercial airlines, with individual ownership capped at 25%. On top of that, the airline must be controlled by Canadians.

Last year, Flair had to restructure in order to reduce the influence of 777 Partners and get Canadians back at the helm.

Though 777 Partners’ stake currently doesn’t break any rules, it raises flags, and the same flags are raised at the possibility of merging with the US-based Vista Acquisition Corp.

Sharethrough Inc.

Along with Hootsuite, Sharethrough is another tech company that delayed its IPO because of turbulence in the Canadian market. Although it’s one of the leading advertising technology companies in the world, it couldn’t fight the adverse market conditions facing tech companies.

According to Sharethrough’s CEO, the company had already received strong interest from investors, but the decision-makers preferred to wait until the market is stable enough for an IPO.

The fact that Sharethrough didn’t completely shut off the IPO means that it’ll probably happen eventually. However, no one knows when it will be, seeing as 2023 was a disappointing year for the IPO market, to say the least.

Market Decline of Canadian Tech IPOs

The year 2021 saw a significant shift in the IPO market, where many tech companies skipped private funding rounds for the sake of going public. During that year alone, 16 tech companies made it public, which marked the end of a slow decade in terms of tech IPOs.

From 2022 onwards, the effects of the Russian war, inflation, and rising oil prices caused general instability in the Canadian public trading market. Interest rates skyrocketed, which caused lower valuations. As a result, many tech companies delayed their public offerings, waiting for the turbulence to pass.

No one knows for sure when the market will re-stabilise and more private companies will be encouraged to go public. However, investors are hoping for the best.

To Sum Up

In summary, the Canadian IPO landscape during the first half of 2023 wasn’t promising. The total funds raised amounted to only $172 million, potentially setting the record for the worst IPO performance during a year.

While many private companies are planning to go public, their timelines remain uncertain. The market is currently uninviting, so investors can only wait on the edge of their seats and hope for the best.

The information in this article is well-researched and factual. Still, it contains opinions also, and IT IS NOT FINANCIAL ADVICE and should not be interpreted as such, do not make any financial decisions based on the information in this article; we are not financial advisors. We are journalists. You should always consult with a professional before making any investment decisions. We hold no stock or interests in any of the Companies discussed on this website/app.

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