Fairfax Financial Holdings, a Toronto investment management firm and the majority owner of embattled agtech company Farmers Edge, is proposing to take it private just two years and eight months after it went public.
Fairfax has offered to buy out Farmers Edge shareholders at 25 cents per share, a nearly 99 per cent discount from the $17 the Winnipeg-based company fetched after going public in March 2021. Farmers Edge’s executive team has yet to review the offer, but the proposed arrangement nonetheless cements a sharp climbdown for the company, a former stock market darling backed by a major Silicon Valley investor that had big ambitions to dominate the burgeoning global agtech sector.
The deal: Fairfax, a long-time Farmers Edge backer, is a 61.4 per cent owner in the company. The offer price amounts to a value just under $10 million, compared to the $835 million market cap the company briefly maintained following its IPO.
Farmers Edge shares nearly doubled on Friday following the news, reaching 0.24 cents per share, or nearly equal to the Fairfax offer.
How we got here: Co-founded in 2005 by Wade Barnes and Curtis MacKinnon, Farmers Edge offers an all-in-one software platform that uses data and artificial intelligence to let farmers detect things like soil moisture, weather patterns, fertilizer spreads or even the presence of harmful insects. It is one of a number of companies—including agriculture behemoths like John Deere and Monsanto—that have begun to sell subscription-based data platforms that help farmers improve their yields.
The company grew rapidly in its early years, securing loads of new subscribers and signing a flurry of partnerships with various technology providers. That caught the eye of major investors including Silicon Valley’s Kleiner Perkins and Japanese trading house Mitsui.
But Farmers Edge struggled to translate its growing subscriber base into revenues, and began burning cash at rapid rates. As its stock continued to decline, former investors like Kleiner sold their positions in the company.
Last year Barnes was replaced as CEO by former Amazon Canada executive Vibhore Arora, who has cut staff, shut down its Australia operations and reduced in-person services in an effort to slash costs. At the same time Barnes stepped down, Fairfax stepped in with a $75 million credit facility to fill its negative cash flow gap. (Arora has improved Farmers Edge’s cash flow deficiencies, but investors appear unconvinced).
The bigger picture: Fairfax’s offer comes after several Canadian tech companies that have gone public in recent years have dropped off the Toronto Stock Exchange. The most recent example: the $257-million buyout of Q4, a software platform that public companies use to communicate with shareholders. As newly public Canadian tech companies have struggled in the market, new tech IPOs have evaporated amid economic headwinds and investors taking a more cautious approach to the sector.
