When Telus International broke a record in February with the biggest tech IPO in TSX history, it seemed it might set the tone for the year—and for the rest of 2021, the deals didn’t stop coming.

But in a market with a growing cohort of Canadian innovation-economy contenders, some of the debutants have struggled to maintain investors’ attention.

Statistics from TMX Group show there were a record 152 IPOs in the first 11 months of this year on the Toronto Stock Exchange, 15.2 per cent more than 2020.

Of the also record-breaking 35 TSX IPOs that were corporations and not funds, seven were life-sciences companies, 14 were technology, and four were clean technology or renewable energy. But of 20 top innovation-economy IPOs in 2021, 11 were trading below their IPO prices by Dec. 23. 

For Dani Lipkin, director of global business development at TSX and TSXV, it still marks “the greatest period ever, in TSX history, for tech IPOs.” Compared with the past decade, which RBC estimates averaged just one tech IPO per year, his reasoning is clear.

“We’re seeing more new companies come to market in terms of just the sheer record of tech IPOs,” Lipkin told The Logic in an interview.

Lipkin said the technology and renewable-energy sectors remain multi-year investor favourites, and low interest rates have also drawn interest in IPOs.

“This is continued enthusiasm around the sector and wanting to find the next great names out there.”

Bruce Murray, CEO of investment-management firm the Murray Wealth Group, said he’s not surprised many newly public companies will end the year trading below their listing price. 

“They had a brilliant private market through 2021. There’s a lot of liquidity provided by governments and just a lot of money sloshing around to buy these things. [Investors’] willingness to take risk had gone up,” he said. 

“But the hype in the IPO process was not met with reality. Investors’ expectations declined. They got tired of waiting for these companies to make money in the first few months and they sold.” 

Here’s a breakdown of the year in Canadian tech IPOs:

Gainers, led by Magnet Forensics

Through November, the total money raised in IPO financings on the TSX and TSXV was up 62.3 per cent and 29.2 per cent year over year. Case in point: as of Dec. 20, Magnet Forensics shares were up nearly 92 per cent from their IPO price. 

Other companies in the green include Copperleaf, recently public Coveo, Payfare, Propel Holdings, VerticalScope, and the aforementioned whale Telus International, which remains up 22 per cent from its IPO price.

Anaergia climbed past its offering price, despite downsizing its fundraising expectations. 

Softchoice also didn’t go public to much initial applause, but CEO Vince De Palma remained optimistic the enterprise technology company had timed the IPO right for growth. De Palma was right: as of Dec. 23, Softchoice shares were up 15 per cent from their IPO price.

Decliners, led by Farmers Edge

Despite a promising first day on the market, agtech-platform maker Farmers Edge was trading nearly 81 per cent below its IPO price on Dec. 23. Other significant declines included MCI Onehealth Technologies (down 76 per cent); B.C. biotech Eupraxia Pharmaceuticals (down almost 73 per cent); and fuel-cell company Loop Energy (down nearly 76 per cent).

LifeSpeak founder and CEO Michael Held offered up an explanation after the digital wellness platform’s public offering, when he said Canada had “a fatigued IPO market.”

Canada’s split end-of-year performance for IPOs tracks with a worldwide trend. Dealogic data provided to the Financial Times suggests that 49 per cent of the IPOs that raised over $1 billion in London, Hong Kong, India and New York are trading below their issuance prices. Dealogic told The Logic that as of Dec. 22, the aftermarket performance of 18 tech IPOs on Canadian exchanges is down nearly seven per cent, compared with 128 U.S. tech IPOs, which have declined an average of about nine per cent. 

Murray noted that IPO markets tend to be cyclical, and it’s not unusual for stock prices of companies that go public later in that cycle to wane. 

“It’s like everything: you sell your best product first. The companies that look the best and investors are most excited about are the ones they put out first. Then, as speculators who largely buy these things make money, they get excited and buy the next one and the next one.

“But later in the cycle,” he warned, “you often see the quality of the product go down.” 

Some Canadian entrants slipped by more modest amounts, though several had already cut their deal sizes this year. MDA saw shares fall about 33 per cent from the IPO after raising less than expected. D2L, which also cut back its deal size, saw shares down about 20 per cent; and Q4 suffered a 30 per cent share price cut. 

Other companies that struggled to breach their IPO prices at the close of the year were Thinkific, E Automotive and Dialogue. Beyond the TSX, some viewed Toronto-founded Alphawave’s London IPO earlier this year as an opportunity lost—but it is now well below its highs for the year. And DiDi, of course, has haunted investors around the world after its large IPO became a target for China’s regulators.

The context

Though some companies didn’t have the 2021 they planned, it’s no surprise that they were jostling to go public earlier this year, after strong openings in late 2020 for companies like MindBeacon. Canadian IPO values grew fivefold between 2019 and 2020 and record-smasher Nuvei went public in the second half of 2020. In March, consultants at PwC Canada said 2021 would be a good time for IPOs from industries that took off during the pandemic, like technology, life sciences, digital health, e-commerce, logistics and online media. 

Aly Gillani of RBC Capital Markets noted the pandemic’s virtual roadshows, which reduced barriers for Canadian companies to shop their deals, coincided with the inevitable investor exits after an abundance of private capital over the past decade. That created an “IPO boom” in the first few months of the year.

Some less conventional offerings also piled in. Among the biggest TSX raises of the year: Bitcoin Trust in January and Ether ETF in April. 

After special-purpose acquisition companies surged in popularity worldwide in the first half of the year, an index of 50 SPACs tracked by CNBC has lost much of its steam. The trend held true for one high-profile Canadian company that went public via SPAC: as of Dec. 22, Quebec firm Lion Electric’s shares were trading well below their initial opening price.

What’s ahead for 2022

Some IPOs mooted for next year include Canadian scale-up Article and global players Binance and LG Energy Solution. They may be joined by other companies that postponed offerings anticipated for 2021 after being spooked by some of their peers’ poor showings.

Hootsuite, like Sharethrough, is reportedly delaying IPO plans, and Vendasta opted for a private round. Brookfield Business Partners subsidiary Clarios delayed its IPO indefinitely. Instacart is likely waiting yet again as it struggles toward a long-sought IPO.

“Every time there’s a downturn in the economy, the capital markets turn around first in anticipation of a recovery, and then IPOs come up,” said Murray.

Murray said that cyclical dynamic, compounded with poor performance by several new issuers, could sway more companies to stay private in 2022. 

“There will probably be a fair number of IPOs next year again, but there won’t be as many as 2021.”  

With files from Catherine McIntyre

Correction: An earlier version of the story named Telesat among the companies expected to go public in 2022. In fact it became a public company in November, though it raised no money in the listing. The story has been updated.