Emerge Commerce, a Toronto-based e-commerce startup that owns a slew of daily-deal companies like WagJag and Buytopia, will make its public-market debut on the Toronto Venture Exchange on Monday through a reverse takeover, valuing the company at $61 million. 

The company’s shares will trade under the symbol ECOM with an opening share price of $0.75. The reverse takeover (RTO) took place via Emerge’s merger with shell company Aumento Capital VII Corporation, a relatively common way of listing on secondary exchanges like the TSX-V. 

The company’s current valuation is approximately 7.5 times what it was worth in 2016 when it acquired Buytopia and Shop.ca, according to Emerge CEO Ghassan Halazon. “When we made our first operating acquisition, the equity that was raised was $0.10 per share. Through the years, we have had financings at $0.20, $0.30, and most recently, $0.60,” he told The Logic.

According to Halazon, Emerge chose to go public via RTO in large part because it would be a “quicker, more cost effective” way to go public compared to a traditional IPO, though it meant the company could not list on the TSX. “We could graduate to the TSX, which is probably going to be in the works over the next 12 to 18 months,” he said. 

Emerge will use the proceeds from the listing to acquire three to five existing e-commerce businesses in the next 24 months, according to the company’s filing statement. “We have an extensive acquisition pipeline in the works and if you look at our track record, we have been increasingly acquiring bigger and more lucrative e-commerce brands throughout our cycle,” Halazon confirmed. “The intent is to accelerate that growth, even if it means making multiple acquisitions in a given year.” 

Besides purchasing profitable niche e-commerce sites, Emerge’s acquisition strategy also involves distressed or out-of-favour e-commerce assets. “Typical targets,” states the company’s filing statement, are “companies with strong customer bases and product offerings but outsized costs structures.” 

Founded in 2016, Emerge started acquiring daily-deals companies, like Buytopia, WagJag and Shop.ca, before branching into the world of golf. Its most recent acquisition was a $12-million purchase of UnderPar, a site that offers discounted golf experiences. Halazon previously told The Logic that the decision to buy UnderPar was rooted in data that the company had accumulated tracking consumer patterns on its daily-deals sites, indicating how sticky the golf market was. 

“We used that same strategy of crunching analytics from our other sites to launch BeRightBack.ca,” Halazon said, referring to a staycation and domestic travel-deals portal that Emerge recently acquired. 

The company has attempted to navigate the pandemic by strategically acquiring businesses Halazon claims have thrived and will continue to thrive throughout the course of the pandemic. 

Yet Emerge’s filings indicate that COVID-19 has had an impact on the company—for example, resulting in a decrease in ad revenue of over 30 per cent from the prior year, and a “significant decrease” in travel-deal revenue. “The overall revenue impact due to COVID-19 was mitigated through a shift towards sale of products and groceries, with growth in certain areas exceeding 400 per cent during the April to June period,” the filings stated. 

One of the primary ways Emerge generates revenue is by collecting a 20 to 25 per cent commission from every purchase made on the sites it owns. Emerge’s filing statement states that its total revenue for the six months ended June 30 was $4.62 million. In 2019, the company generated a revenue of $4.16 million, a slight increase from 2018 revenue of $3.97 million. Halazon had previously told The Logic that the company’s 2019 revenue was in the $10-million to $25-million range, though he has since clarified that he had included UnderPar’s revenue in that figure. 

Indeed, documents filed on SEDAR show that for the nine months ended Oct. 31, 2019, Athletesvideo, the holding company for UnderPar, generated $6.2 million in revenue. Emerge reported a net loss of $540,243 in the first half of 2020, a drop from its $865,112 net gain in income for the same period in 2019. 

Although it was sitting on about $8.87 million in cash as of June 30, Emerge’s spending rate has been notably high. For the six months ended the same date the company’s selling, general and administrative costs were over $2.47 million—that number was around $3.44 million for all of 2019. The company attributed its expense rate in 2019 to “wage costs” arising from growing its management and administrative team as it expanded its portfolio of companies through acquisitions. In 2020, Emerge said its expenses were mainly due to costs associated with the acquisition of UnderPar.

Along with its public-market debut, Emerge has made changes to its board, appointing John Kim as director. Kim also sits on the board of Well Health Technologies, the Vancouver-based digital-health company. Halazon said Kim’s appointment would provide M&A expertise and capital-market experience to Emerge as a newly listed company. “Well Health grew from $0.20 or $0.30 a share to seven bucks, and is now a unicorn,” Halazon added. “That’s what we’re aiming for.”