For many of the tech companies that made debuts to great fanfare on Canadian exchanges since the pandemic began, the post-IPO hangover has been brutal.
Stocks whose initial public offerings were heavily oversubscribed as a result of ravenous investor appetite earlier in the year are now struggling to find shareholder support.
The biggest casualties of the 2021 class of tech newcomers have seen their share prices plunge by more than half from their highs of the year to date, with names such as Thinkific Labs Inc. , Farmers Edge Inc. and Magnet Forensics Inc. among the hardest hit.
The group’s sell-off has gained speed in recent weeks as investors globally have rotated out of technology stocks for fear of rising interest rates and inflation.
“We’re hopeful that there’s going to be a bounce-back for many of these companies,” said Ron Shuttleworth, a partner at Toronto-based Oak Hill Financial. “These stocks are definitely on sale going into the new year. The question is whether there will be enough buyers.”
Tech sector IPOs are booming in Canada. But their returns, on average, are pretty dismal
Can Canada’s red hot technology sector last?
Tech investors in Canada suddenly have much more to choose from – perhaps too much.
In the decade prior to the pandemic, the IPO market in Canada largely laid dormant. In 2019, there was a grand total of four new issues on the Toronto Stock Exchange.
That trend started to reverse last year, as surging pandemic-era stock markets raised the appeal of going public for earlier-stage companies, particularly in Canada’s burgeoning tech sector.
Up until the end of October, 29 companies have started trading on the TSX, having raised $8.1-billion, according to TSX data. That’s more activity than in any full calendar year going back a decade.
Legal software provider Dye & Durham Ltd. kicked off the tech IPO boom in July, 2020. Enthusiasm for the new listing pushed its share price up almost seven-fold by the end of last year.
A wave of new listings followed, including payments processor Nuvei Corp. , telemedicine startup MindBeacon Holdings Inc. and Telus Corp. spinout Telus International (Cda) Inc. , all to intense investor demand.
ATB Capital Markets analyst Martin Toner tracks 12 tech companies that completed their IPOs on the TSX this year, having raised $1.8-billion.
“We believe the space has been saturated by the high number of technology IPOs, with growth capital being spread thin across the various companies,” Mr. Toner wrote in a recent note.
“Several of these recent IPOs are fairly small, and more susceptible to selloffs given they do not have an established shareholder base nor do most of them have wide institutional support yet.”
For many of the tech companies that made debuts to great fanfare on Canadian exchanges since the pandemic began, the post-IPO hangover has been brutal.
Stocks whose initial public offerings were heavily oversubscribed as a result of ravenous investor appetite earlier in the year are now struggling to find shareholder support.
The biggest casualties of the 2021 class of tech newcomers have seen their share prices plunge by more than half from their highs of the year to date, with names such as Thinkific Labs Inc. , Farmers Edge Inc. and Magnet Forensics Inc. among the hardest hit.
The group’s sell-off has gained speed in recent weeks as investors globally have rotated out of technology stocks for fear of rising interest rates and inflation.
“We’re hopeful that there’s going to be a bounce-back for many of these companies,” said Ron Shuttleworth, a partner at Toronto-based Oak Hill Financial. “These stocks are definitely on sale going into the new year. The question is whether there will be enough buyers.”
Tech sector IPOs are booming in Canada. But their returns, on average, are pretty dismal
Can Canada’s red hot technology sector last?
Tech investors in Canada suddenly have much more to choose from – perhaps too much.
In the decade prior to the pandemic, the IPO market in Canada largely laid dormant. In 2019, there was a grand total of four new issues on the Toronto Stock Exchange.
That trend started to reverse last year, as surging pandemic-era stock markets raised the appeal of going public for earlier-stage companies, particularly in Canada’s burgeoning tech sector.
Up until the end of October, 29 companies have started trading on the TSX, having raised $8.1-billion, according to TSX data. That’s more activity than in any full calendar year going back a decade.
Legal software provider Dye & Durham Ltd. kicked off the tech IPO boom in July, 2020. Enthusiasm for the new listing pushed its share price up almost seven-fold by the end of last year.
A wave of new listings followed, including payments processor Nuvei Corp. , telemedicine startup MindBeacon Holdings Inc. and Telus Corp. spinout Telus International (Cda) Inc. , all to intense investor demand.
ATB Capital Markets analyst Martin Toner tracks 12 tech companies that completed their IPOs on the TSX this year, having raised $1.8-billion.
“We believe the space has been saturated by the high number of technology IPOs, with growth capital being spread thin across the various companies,” Mr. Toner wrote in a recent note.
“Several of these recent IPOs are fairly small, and more susceptible to selloffs given they do not have an established shareholder base nor do most of them have wide institutional support yet.”