Toronto-based property-technology company Pineapple Financial has filed for a US$17.25-million initial public offering on the Nasdaq, making it one of few Canadian innovation-economy firms to venture into the public markets despite the current economic headwinds.

“Through data-driven systems together with cloud-based tools, we believe we offer competitive advantages in the Canadian mortgage industry relative to alternative mortgage broker arrangements,” Pineapple said in its January filing with the U.S. Securities and Exchange Commission. 

It did not disclose in what range it plans to price its shares. It intends to trade under the symbol PAPL on the Nasdaq Capital Market, a tier that focuses on early-stage companies with smaller market capitalizations. Pineapple did not respond to The Logic’s request for comment.

Founded in 2016, Pineapple provides “mortgage-brokerage services and tech solutions to Canadian mortgage agents, brokers, sub-brokers, brokerages and consumers.” It’s been approved to operate in 11 provinces as of the date of its filing, and had 55 full-time employees.

Its MyPineapple platform is “at the heart” of the services it provides, the filing says. With a monthly subscription, users can access services like data management and reporting, customer-relationship management, deal processing and payroll.

Pineapple makes money through sales, subscriptions and underwriting, its preliminary prospectus said. Lender partners pay Pineapple a commission—on average it earns about 100 basis points for every dollar of the mortgage  funded—when a deal closes. These commissions account for 95 per cent of its gross revenue. It also earns money from MyPineapple subscriptions and from offering a risk pre-assessment service to its lender partners.

Pineapple previously closed a $9-million-plus Series A in April 2021. It did not disclose its investors, but according to PitchBook, the round valued the company at about $20 million.

Pineapple plans to use the money it raises from the IPO to grow its business. It plans to spend 40 per cent of the proceeds on improving its technology, the filing said, and 20 per cent on expanding in North America and globally. It will also set aside some money to further develop its subsidiary Pineapple Insurance, which it intends will offer products like life insurance. Combined with its existing cash balance of about US$3.9 million at the end of August 2022, Pineapple expects the proceeds of the IPO to give it at least 36 months of runway.

Like many tech firms that go public, Pineapple is not yet profitable. In its financial year ended Aug. 31, 2021, it reported a total comprehensive loss of roughly US$338,000. That grew to roughly US$3 million for the same timeframe in 2022 as the company spent more on salaries, wages and benefits.

Its revenue has been rising, but the cost of making those sales has grown, as well. In its 2021 financial year, it recorded about US$16.1 million in gross revenue, which grew 26 per cent to roughly US$20.4 million in 2022. However, the cost of revenue—meaning the commissions Pineapple pays to agents—jumped 28 per cent over that same time.

The markets have been relatively quiet for innovation-economy firms for more than a year. On the Toronto Stock Exchange, only one firm from the tech, cleantech and life-sciences sectors held an IPO in 2022, reflective of a global slowdown. Many firms are sitting on the sidelines waiting for better economic conditions, but some—especially in the U.S.—have started to test the markets again. 

Smaller biotech firms, especially those with human drug trials in progress, are one group eyeing the markets. In the first quarter of the year, Mineralys Therapeutics and Structure Therapeutics both closed IPOs on the Nasdaq where they raised US$220.8 million and US$185.3 million, respectively, with underwriters exercising their full over-allotment options in both cases. Meanwhile, Reddit is reportedly aiming for a second-quarter public-market debut.

Another Canadian firm, Oakville, Ont.-based Droneify, filed for a US$6-million IPO on the Nasdaq Capital Market last month. But neither Droneify nor Pineapple is big enough to indicate much about the broader market, said David Wismer, global head of technology investment and corporate banking at BMO Capital Markets, in an email to The Logic. 

He pointed to revenue as indicative of being a small player: Droneify, after the cost of revenue is taken into account, made roughly US$117,000 for the six months ending June 30, 2022, and Pineapple’s was roughly US$3.6 million in its 2022 financial year. It’s possible Pineapple may be unable to secure capital from the private market, he said.