HootSuite IPO could be the start of tech sector resurgence in stock market
By Patrick Vaillancourt, News Editor
A Vancouver-based tech company has toyed with the idea of going public, causing speculations that the Canadian technology sector could be due for a resurgence.
The social media management platform HootSuite, which made headlines last spring as it struggled with media reports that it was not paying some of its interns, is projected to hit the public stock market within the next two years, according to financial experts.
Currently, mining and energy stocks are predominant on the Canadian Stock Exchange. A decline in mining and natural resource stocks could lead to the resurgence of a tech boom—a bubble which burst in the early 2000s with the failure of Canadian technology giants, such as Nortel Networks.
Technology companies in Canada are making some investors wealthy, with an average 36 per cent rise in value in 2013—comparable to competitors south of the border. The government’s funding model for private companies is lucrative enough to keep companies like HootSuite from crossing the border into the United States.
HootSuite counts PepsiCo, Sony Music, IBM, and Tiffany & Co. amongst its major clients, and analysts say that the social media management company will fit right in on the Toronto Stock Exchange (TSX).
Desire2Learn Inc. and Vision Critical Communications Inc. are also among companies that may consider an initial public offering (IPO) in the next two years.
HootSuite, Desire2Learn, and Vision Critical “certainly are big enough and the markets are ready enough,” said Tom Astle, an executive from Difference Capital, a Toronto investment firm. “The market still seems to be fairly open.”
The technology sector is expected to raise upwards of $400 million through IPOs this year, which seems to indicate that tech stocks are making a comeback in Canada. Nortel Networks went bankrupt in 2009, along with Canadian smartphone-maker BlackBerry’s decline in recent years, have crippled what was once a powerful sector on the Toronto Stock Exchange.
The decline in resource stocks over the last five years and the rise of software platforms, especially those linked to social media websites, have contributed to the growth of the tech sector.
Sanjiv Samant, head of technology for Canaccord Genuity, said that tech stocks will pick up where mining stocks have declined.
Samant said that, “generally speaking, it looks like investors are gearing up for a bigger cycle on the technology side right now.”
HootSuite, along with several other Canadian technology upstarts, are among businesses invested in by the Ontario Municipal Employees pension fund (OMERS), which has a reputation for providing pre-IPO capital investment.
OMERS has said that it has a number of companies ready for IPO and that Canadian investors are looking for new tech stocks to put in their investment portfolios.
“We have the deepest IPO pipeline that we’ve ever seen,” said John Ruffolo, an OMERS investor.