AnalytixInsight

We witnessed a decent level of Canadian public company M&A last week, with over $300 million of transactions in the past week. Recall, Sophic Capital has previously suggested that M&A could be a positive catalyst for small to mid cap innovation companies in the fall. At the same time, private companies saw over $300 million of VC funding as well. GlobalFoundries Inc has filed confidentially with U.S regulators for an initial public offering (IPO) in New York that could value the chipmaker at around US$25 billion, we could see an allocation of capital to hard tech, such as semiconductors, owing to recent geopolitical tensions, according to some industry watchers. Tencent warned on its second-quarter earnings call that China’s regulatory crackdown on internet companies will continue, as Asian tech stocks stumbled again after a series of volatile weeks. Topps trading cards terminated its SPAC merger and Michael Burry, of the Big Short fame, unveiled a new short bet against Cathie’s Wood’s innovation ETF.

Last week saw a major financing by Lightspeed (LSPD-NYSE, LSPD-TSX), raising almost a billion dollars in equity. In addition, in Canada, Freshbooks attained unicorn status. In the USA, car sharing platform Turo has filed confidentially for an IPO. Neobank Chime raised US$750 million at a US$25 billion valuation, the company was valued at US$14.5 billion last fall. Brazilian digital bank Nubank, which has a multimillion-dollar investment from legendary investor Warren Buffett’s company, is planning an initial public offering of more than US$2 billion in the US stock market, according to a Bloomberg report. The regulatory overhang on China tech investments continues, with SoftBank Group CEO Masayoshi Son saying his company will take a wait-and-see approach with new investments in China. CATL, the Chinese lithium battery giant that counts Tesla and other electric vehicle makers as its customers, plans to raise as much as US$9 billion in a private share placement to expand its battery production. In the gaming space, Entain will acquire esports platform Unikrn for £50 million, which we believe could represent a lower valuation from the company’s private valuation. While Golden Nugget spiked 55% after DraftKings agrees to buy it for US$1.56 billion.

M&A appears to have been a major theme this past week. At Sophic, we believe M&A could be a positive catalyst for small cap Canadian innovation stocks in the fall. Additionally, consensus expectations are for capital markets activity to accelerate in that period. In Canada, theScore, a pioneer in sports media and now the sports betting space, which we covered as equity analysts on the sell side, announced it was was being acquired for US$2 billion in a cash and stock deal. Sophic client, Nanotech Security Corp was acquired by Meta Materials for approximately $90 million, and HIRE Technologies, also a Sophic client announced it was acquiring, Leaders and Co., along with a loan facility and concurrent financing. In the USA, Square will acquire Australia’s Afterpay for US$29 billion, Marvell Technology will acquire Innovium in all-stock deal valued at US$1.1 billion. At the same time, U.K. is considering blocking Nvidia’s US$40 billion Arm deal on national security grounds.

Toronto based 1Password’s $125 million raise at a $2.5 billion valuation received a lot of interest this past week. While public markets saw a large number of tech companies report their Q2 financials. In the USA, popular trading app, Robinhood dropped 12% in its trading debut, while investor interest in fintech stocks has remained elevated these past few months. Regulatory overhangs on US listed Chinese stocks persisted, as SEC has stopped processing registrations of US IPOs and other sales of securities by Chinese companies. While Trevor Milton, the founder of electric truck maker Nikola, has been indicted on charges of making false and misleading statements to investors, the US Department of Justice said on Thursday. In Canada, Shopify (SHOP-NYSE, SHOP-TSX) now allows merchants to sell NFTs directly through their storefronts.