Weekly Investment News and Analysis

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.

Last week saw a fair bit of news pertaining to Canadian VC activity, including a shout out from market intelligence firm CB Insights, indicating data indicates that Canadian startups this year have already raised more than double their 2020 totals. The same data set indicates that Canada’s venture capital results now rival those of the entire Latin American region. In the public markets small cap space, Kraken Robotics (Sophic Client, PNG-TSXV, KRKNF-OTC) signed definitive agreement to acquire PanGeo and announced a public offering of units for approximately $10 million and Body and Mind (Sophic Client, BAMM-CSE, BMMJ-OTC) closed a US$11.1 million debt financing. Sophic Client LuckBox (LUCK-TSXV, LUKEF-OTC) CEO, Thomas Rosander investor update. In the USA, Robinhood plans to raise as much as US$2.3 billion in its upcoming stock-market debut. The popular investing app said it’s offering 55 million shares priced at between US$38 and US$42 each during its roadshow. At the top end of that range, Robinhood could have a market valuation of US$35 billion. Bitcoin mining firm Core Scientific is going public via SPAC in a US$4.3 billion deal. Lastly, with overhang on US listed Chinese equities increasing, the Nasdaq could rise 10%, according to investment firm Wedbush.

Canadian public capital markets appear to be in the seasonal summer lull, which most industry participants expect to be more pronounced than usual this year. That said, Sophic Client GameSquare Esports (GSQ-CSE) announced a second acquisition in a few weeks, as management executes on a disciplined M&A strategy. Wealthsimple has introduced fractional shares to make buying and selling large stocks more accessible for new retail investors. The move comes amid a recent rise in retail investing on trading platforms during COVID-19, which has benefitted Wealthsimple. For investors looking to play the retail investing trend, Sophic Client, AnalytixInsight (ALY-TSXV, ATIXF-OTC) could be an interesting stock to watch in the fall. In the USA, there was a decent level of IPO activity this past week, combined with potentially large M&A. At the same time, numerous news items allude to regulatory risk for large cap tech, including the US President & White House sparring with Facebook over the misinformation on the platform.

A lot of attention this week focused on US listed Chinese equities, which have collectively lost nearly a trillion dollars of value as recent regulatory uncertainty clouds these stocks. In North America, Toronto and US startups hit records for VC funding in H1/2021 – in both cases, six month activity nearly matched all of 2020. Payments firm, Stripe could be taking its first steps to its public markets debut, while European fintech Wise, direct listed in London, and Nextdoor and Planet Labs are going public in the US via the SPAC route. Sophic Capital client Real Luck Group (LUCK-TSXV, LUKEF-OTC) is poised to become a dominant esports betting service. CEO Thomas Rosander is hosting an investor update on Monday, July 19 at noon EST / 9am PST. Investors are encouraged to submit their questions via email at All@SophicCapital.com. Another Sophic client, Swarmio (Private) is aiming to go public on Canadian Securities Exchange as indicated in Canadian tech blog Betakit.

This past holiday shortened week saw a lower level of Canadian capital markets activity than we’ve all grown accustomed to over the past few months. As we head into the short US trading week, and the summer, the consensus seems to be that the recent high volume of capital markets activity may slow down. That said, Robinhood filed for its much anticipated IPO, on the back of a large US$70 million FINRA fine and other regulatory concerns, including that the CEO had federal prosecutors serve a search warrant on his cellphone. Some have argued that Robinhood’s IPO could mark the top for “meme” stocks — time will tell. Even as regulatory risks seem to mount for large tech companies, a D.C. federal court on Monday dismissed two antitrust cases brought against Facebook last year in a major setback for federal and state regulators. On the streaming media front, both Apple and Disney appear to be running into some headwinds, as evidenced by a few data points. CRISPR injected into blood treated a genetic disease for first time. In a medical first, researchers injected a CRISPR drug into the blood of people born with a disease that causes fatal nerve and heart disease and shown that in three of them it nearly shut off production of toxic protein by their livers, which could herald a new phase fore this exciting new technology.

As we’ve been pointing out in this column for a while, Canadian tech VC and public markets activity has been witnessing a major increase in activity – unlike anything we’ve ever witnessed in our over a decade on the sell-side. The Globe & Mail recently pointed out that Canadian VC funding records for the second consecutive quarter in Q2, puts the sector on track to surpass the all-time high for a single year, set during the dot-com bubble a generation ago. Public markets are likely not far behind either, and we have witnessed very strong IPO in activity in Canada in the recent past. The Senate passed Bill C-218, legalizing single-event sports betting in Canada – we expect busy capital market on the back of this bill, and have already witnessed the first signs, with Fansunite’s (FANS-CSE) equity offering announced just hours after the bill was passed. In the USA, Robhinhood’s much anticipated public markets debut appears a bit delayed, likely owing to its crypto business drawing questions from the US SEC. Aside from this delay, last week was very busy for US tech IPOs, even as there appear to be new privacy, and big tech related regulatory questions nearly every day in the USA and Europe.

While last week saw relatively fewer innovation sector public markets transactions in Canada, we saw employee wellness software firm LifeSpeak file for a TSX IPO, VerticalScope upsized its IPO to $125 million, and Shopify reportedly invested in Stripe, bringing its total stake to over $350 million. In the USA, and Europe there appears to be increasing focus on regulations and consumer privacy, including the appointment of tech critic Lina Khan as FTC Chair, a Senate proposal for a new US agency to protect Americans’ data, Google’s adtech business reportedly set to face a formal EU probe by year-end, and U.K. regulators looking to examine if Google and Apple run a smartphone duopoly. Sophic client, Killi (MYID-TSXV, MYIDF-OTC) could be a way for investors to gain exposure to this theme. We’re awaiting public markets debuts by PUBG maker, Krafton in South Korea, Grocery courier Boxed via a SPAC deal, and fintech provider Wise via a London direct listing.

Last week was exceptionally busy in Canadian capital markets with regards to both public and private markets funding. We witnessed very robust activity with M&A and associated funding, IPO activity, a couple US listing and a few more iconic VC funding rounds – the Canadian tech funding ecosystem seems to evolving very nicely. In the small cap space, we saw a successful marketed offering by Sophic Client AnalytixInsight (ALY-TSXV, ATIXF-OTC). In addition, privately held crypto custodian Brane Capital, saw a strategic investment by DMG Blockchain Solutions — we’ve been tracking the company for a year, and they appear to be making good progress. In the US, Goldman Sachs’ global head of internet banking, recently remarked that a “listings supercycle” for tech companies was only just beginning. We’re excited! Even though, Grab pushed back its US$40 billion SPAC target date, we’re keeping an eye out for this one. Robinhood could be public next month, and Didi Chuxing’s IPO filing warrants deeper attention.

This past week was relatively quiet in terms of new public markets funding, in fact, in the United States, Barrons observed — DLocal is the only IPO this week due to the Memorial Day holiday. Next week, several companies are scheduled to go public, including TaskUs, LifeStance Health Group, and monday.com. We hosted an investor presentation for Sophic Client. In Canada, Dye & Durham (DND-TSX), following an indication of interest from a shareholder group led by management to acquire the Company, its board of directors has commenced a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value. The indication of interest would result in Dye & Durham being taken private at an approximate 23% premium to the current market value, being a per share value of $50.50 — recall the company raised $200 million in equity at $50.50/sh (in addition to convertible debt), a few months ago.

The holiday shortened last week in Canada, saw very healthy levels of capital markets activity, in public markets, including IPOs, equity financings and some convertible debt as well. VC financing had positive newsflow as well. In addition, many companies, including multiple Sophic clients reported their quarterly financial results. In the USA, we’re paying attention to Acorns’ potential SPAC deal, Vimeo’s public market debut, additional stock awards at WeWork, and Amazon’s MGM acquisition, which we mentioned when the potential acquisition first surfaced a week ago. Outside North America, we’re watching Gojek and Tokopedia’s holding group GoTo’s IPO and fundraising later this year, and Paytm’s potential IPO in India.