What’s wrong with the IPO market?

Canada’s IPO market is drier than a desert valley at high noon. 

Driving the news: Of the 20 tech companies that went public on the TSX between mid-2020 and late 2021, digital meeting tool company Q4 has become the sixth to officially de-list — with private equity firm Sumeru buying up the company’s shares for half of their issue price.

• Like seemingly everything these days, interest rates and economic anxiety have tempered the IPO market, killing valuations and investor risk appetite. 

Zoom out: Going public in Canada has become about as attractive as getting a root canal. Only one company, Lithium Royalty, has listed on the TSX this year, with shares falling by 33% since. Unless a surprise IPO happens by December, it’ll be the lowest total since 1993.

• In the U.S., potential blockbuster IPOs between Instacart, Klaviyo, Birkenstock, and Arm were supposed to revive public listings this year. Instead, they underperformed. 

Why it matters: IPOs can help pump fresh blood into Canada’s main stock index, which has remained mostly stagnant in 2023, and is currently down ~1% from last year. And if no tech companies are listing, it might be some time until we see a tech-fuelled surge in the index.

• Though blue-chip tech stocks with outsized impacts on markets are very hard to come by, a Shopify surge led to the index’s best day of the year earlier this month.

What’s next: Canadian IPOs could rebound next year, between Blackberry spinning off its IoT biz and growth in the resources sector. Conversely, a recession and panic-inducing geopolitical factors (i.e. a U.S. election, war in the Middle East) could mean new lows.—QH