This year has been another productive one for Canada’s technology/innovation sector, and the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV) head of business development Michael Kousaie broke it all down.
Kousaie explains the growth and illustrates five key points behind the positive numbers, summing it all up in a video which you can watch at the bottom of the page. In this case, the Canadian technology/innovation sector encompases technology, clean technolgoy and life sciences.
Going Public is Still a Strong Goal
2016 was a record year in terms of how many companies went public on TSX markets, as 41 tech/innovation outlets in total took the plunge. This was mostly in the small-cap exchange and TSXV. In the first half of 2017, 18 companies have gone public, maintaining that strong pace. This year has seen more large-cap companies go public, signalling the continued maturation of the sector. Kousaie highlights a particularly interesting aspect in the video below.
“Canada is one of the few places in the world where startups growth stage companies and unicorns can use the public markets to realize their corporate objectives,” he says.
This realization became evident in May when Ontario-based Real Matters went public with a $1.2 billion valuation, and days later a much smaller startup went public as well.
Investors Reward Growth
Growth is not the only thing that matters in the technology sector, but investors do love a company that has a plan and can scale. This trend is particularly evident in early-stage companies with a lot of potential listed on the TSXV.
Scarcity Drives Interest and Valuation
Many IPOs on the TSX and TSXV in every sector have been successful and well-received by investors, which creates a pent-up demand for high quality companies. This scarcity of companies that fit those parameters and go public means that terms and valuations are driven higher and higher.
Canadian Technology is Making People Money
Perhaps the most important aspect is that these new companies continually make money for investors. The S&P/TSX Tech Index has outperformed the Canadian benchmark index and the S&P 500 over the past one, three and five year periods.
In a wholly Canadian move, the TSX and TSXV has always been a welcoming listing venue for non-Canadian companies. In the technology/innovation sector, 25 per cent of companies going public since 2016 have been from the U.S., Europe, Israel and South America.
“The key takeaway is that the technology/innovation sector continues to perform well and we are hopeful that global leaders will continue to emerge from our markets,” Kousaie writes.
Companies are now approaching public offerings as a “when” not an “if” option, which means companies are building to last long and make an impact rather than sell quickly.
“We’re standing-by to help company executives, investors and advisors with transaction preparations, to provide guidance on public market readiness, to make referrals/introductions to advisors, to help companies build profile with the investment community,” writes Kousaie.
It looks like the second half of 2017 will bode well for Canadian technology and innovation companies.