Weekly Investment News and Analysis

A few stocks we track at Sophic, have performed well recently, in addition, E Automotive, an online vehicle auction marketplace, is planning to go public on the Toronto Stock Exchange. Montreal based Sharethrough, announced the pricing of its TSX IPO, as the company is looking to raise approximately $75 million in gross proceeds. Investor relations software provider Q4 Inc. reportedly cut the size and pricing of its planned IPO on the TSX. Galaxy Digital (GLXY-TSX) announced that its affiliate, Galaxy Interactive, raised a fund with $325 million of committed capital, with participation from over 70 new LPs, including institutional investors, endowments, strategic investors, and family offices. WonderFi (WNDR-NEO) upsized its previously announced bought deal private placement. Rolling Stone Magazine gave a shoutout to Sophic Client GameSquare Esports (GSQ-CSE), while we published a note on potential benefits for GameSquare and milestones that investors can look forward to. We also highlighted that Sophic Client HempFusion (CBD.U-TSXV) continues to grow its direct-to-consumer, business-to-business, online, and white label channels and has expanded its number of retail doors. In the USA, a top ByteDance investor weighed a US$500 million stake sale, WeWork shares rose in their trading debut after its SPAC merger, and crypto exchange Bakkt slid in its debut after SPAC deal and Intel blamed chip shortages for its Q3 sales miss, sending its stock down 9% on the news.

Thinkific Labs Inc (THNC-TSX), filed a preliminary and short form base shelf prospectus for up to an aggregate of $300 million. D2L filed to go public on TSX, the company expects to raise a nine-figure sum at valuation of more than US$1 billion through its IPO. We attended the company’s investor day a few years ago – and it’s great to see another iconic Canadian tech company go public on the TSX. We counted well over $100 million in funding for private Canadian innovation companies last week, and saw announcements totalling nearly a billion dollars towards VC funds. We published on Clear Blue Technologies’ (Sophic Client, CBLU-TSXV, CBUTF-OTC, 0YA-FRA) ability to automate and digitize day-to-day operations for providing clean wireless power off-grid, while collecting data as a competitive advantage. With over 400 customers, including Orange and Telefonica, it’s Clear Blue sky for the Company. In the USA, venture capital-backed companies completed initial public offerings, reverse mergers and acquisitions worth a record US$582.5 billion so far this year, according to new data from PitchBook. This is the first time U.S. VC exit value has surpassed US$500 billion. Magic Leap, the troubled augmented reality company that underwent mass layoffs and a CEO change last year, has raised US$500 million at a valuation of close to US$2 billion. Stock chart website TradingView was valued at US$3 billion. GitLab jumped 35% in its Nasdaq debut after the code-sharing company priced IPO above expected range. Bitcoin once again hit record highs even as Coinbase wants SEC blocked from crypto and Jamie Dimon called bitcoin ‘worthless’, while Vladimir Putin sees value in cryptocurrencies – but says it’s too early to tell if they can settle oil trades and Stripe is building a crypto team.

SUMMARY: After a few weeks of public markets volatility dampened new public company transactions, last week saw a bit of an uptick. Nuvei (MEI-NASDAQ, NVEI-TSX) closed an upsized US$425 million initial public offering in the United States. Quarterhill (QTRH-TSX) announced the filing of a preliminary $200 million base shelf prospectus. Dye & Durham (DND-TSX) announced a recapitalization of its credit facilities totalling $1.8 billion, ending a strategic review process that commenced in May. Q4 Inc. announced the resumption of plans to go public on the TSX. At Sophic, we published a piece on Clear Blue Technologies’ (Sophic Client, CBLU-TSXV, CBUTF-OTC, 0YA-FRA) core business of providing clean, wireless power solutions serving the multi-billion dollar off-grid market. In the USA, there was positive movement towards public markets debuts by Rent the Runway, Udemy, GlobalFoundries, AvidXchange, HireRight, GitLab and Genesys. Year-to-date, penny stock trading volume hit a record US$548 billion, soaring past 2020 totals as retail investors poured into the market. NFT sales surged to US$10.7 billion in Q3 .Snapchat and Telegram benefited from Facebook’s long outage.

Last week, more than $2-billion was shaved off Lightspeed’s (LSPD-NYSE, LSPD-TSX) market cap in response to a short-seller report. Fintech Propel filed a preliminary prospectus for an IPO. Sophic client, HIRE Technologies (HIRE-TSXV) strengthened its balance sheet by closing a $2.8 million second tranche non-brokered private placement for a total of $4.8 million oversubscribed financing. The company has been growing at higher than market growth rates, a stronger balance sheet should help the company accelerate growth. Canadian tech talent scored another win as Stripe announced its first Canadian office in Toronto. In light of recent market turbulence Allvue Systems postponed its IPO in the USA. However, on Friday, electric vehicle maker Rivian filed for its IPO. Earlier in the week, EV company Polestar announced it would merge with Gores Guggenheim SPAC in a US$20 billion deal. Amazon unveiled a new robot, updated devices, and also revealed it was expanding into the fitness market, putting itself in competition with Apple more directly. TikTok reached 1 billion monthly active users, and also made its first foray into NFTs. The Fed has ‘no intention’ to ban cryptocurrencies, Jerome Powell told Congress. At Sophic Capital, we published notes on GameSquare Esports (GSQ-CSE) as Esports influencer TimTheTatman recently announced that he would join Complexity Gaming and GameSquare Esports and Body and Mind Inc. (BAMM-CSE, BMMJ-OTC), which has a strong brand presence in Nevada and could benefit in that state.

This past week was relatively quiet in Canadian capital markets, in the face of global market volatility, however there were multiple developments in various innovation sectors globally. In Canada, Shopify (SHOP-TSX, SHOP-NYSE) reportedly surpassed Amazon in online traffic. Vancouver-based Dapper Labs raised US$250 million led by Coatue. These two developments, once again highlight how the tech ecosystem, and investing opportunities in Canada have expanded in recent times. CEO of Sophic Client Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA), Miriam Tuerk, showed how Clear Blue’s power innovation for MNOs in Africa unleashes The Green New Deal that pays for itself in an interesting industry discussion. In the USA, Toast and Freshworks had strong public market debuts, and WeWork set Oct. 21 as the date of its public listing. DraftKings stock dropped after a CNBC report of a US$20 billion cash-and-stock buyout bid for U.K.’s Entain. China said all crypto-related transactions are illegal, and the SEC’s Gary Gensler criticizes stablecoins amid call for tougher crypto regulation.

Last week saw a complementary $600 million notes offering by (GIB.A-TSX, GIB-NYSE) following a US$1 billion notes offering the week before. Neo Financial is furthering its push to become a full-stack digital bank: the three-year-old startup closed a $64 million Series B round this summer led by Peter Thiel-backed Valar Ventures, which also led Neo’s Series A financing. We published a piece on Sophic client UGE (UGE-TSXV, UGEIF-OTC) highlighting that the company’s solar project backlog continues to be undervalued compared to mid scale project transactions. The stock is trading at an implied US$0.44/W, which represents about a 43% discount to the average US$0.77/W peer transactions, before accounting for any additional project wins. In the USA, Toast, GitLab, and Forge Global could be some interesting new listings to add to your screens. There was also a fair amount of news in the crypto space, with both bullish and bearish takeaways.

With a major unsecured notes offering announced by CGI (GIB.A-TSX, GIB-NYSE) seeking to raise US$1 billion, and funding for another couple hundred million dollars announced by private VC backed Canadian companies, September is of to a good start by the Canadian innovation sector in capital markets. In addition M&A, remains an active theme, with a major acquisition and exit announced in the space this past week. Stripe is discussing a 2022 public listing, which could be an interesting stock to look out for, as well as Sportradar, which could go public soon. SoftBank announced a Deutsche Telekom share swap deal, and in addition will borrow against its remaining T-Mobile stock, which could aid global VC funding as SoftBank’s Vision Fund 2 is trying to invest more in European tech companies. On the regulatory front, a judge just ruled a massive blow against Apple’s App Store business. With a Japanese acquisition, PayPal gains a buy now, pay later (BNPL) service platform, even as some US data suggested credit risk in this segment. In the ESG space, we saw ambitious long term US solar plans, per a NY Times article, which could move the US towards producing almost half of its electricity from the sun by 2050 and a major investment into car battery tech by Toyota.

While this past week was relatively quiet in Canadian public markets, EMERGE Commerce (ECOM-TSXV) announced a $24 million acquisition funded with cash on hand. Consensus expectations call for a busy fall, with regards to “risk-on” driving public capital markets activity in Canada. Private Canadian VC backed companies announced a couple hundred million dollars of funding last week, which appears to be lower than the past few weeks. In the USA, despite lower SPAC activity leading to fewer IPOS in Q2 2021, more companies continue on the path to being public. Last week, Allbirds, Reddit, Samsara, Binance, and NordicTrack were amongst companies that announced plans to go public. Intuit could be in talks to buy Mailchimp for more than US$10 billion, and Robinhood’s stock fell after Securities and Exchange Commission Chairman Gary Gensler told Barron’s that banning the controversial practice of payment for order flow is “on the table” and PayPal is exploring a stock-trading service for US customers amid a boom in retail investing, CNBC first reported Monday.

Last week, we saw an upsize raise announcement from Converge Technology Solutions Corp. (CTS-TSX), raising $225 million, before its greenshoe option. Private innovation companies announced financings of around $400 million. Shopify’s (SHOP-NYSE, SHOP-TSX) integration with Tik Tok garnered widespread attention. In the ecommerce space, on Friday afternoon, Affirm shares soared on news of an Amazon partnership for buy now, pay later. Recall, Affirm also partners with Shopify, which also had a stake in the in Affirm at the time of Affirm’s IPO. In August, Square jumped into the space with a US$29 billion deal to buy Australian fintech Afterpay. The week also saw announcements pertaining to public market entrances by Rivian, drawing a response from Elon Musk. As well as news of Warby Parker, Toast, Virgin Orbit, and Forbes going public.

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.