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Weekly Cache

Weekly Investment News and Analysis

Please see what we’ve been reading in technology and ESG related investing this week. Please feel free to send us what you’ve found interesting.

Latest Invesment News

November 27, 2022: Unsurprising, Yet Rough Q3 For Canadian VC Funding

In the US holiday shortened week, the Dow Jones Industrial was up 1.7%, S&P 500 index climbed 1.5%, and the Nasdaq was up 0.8%. In the third quarter, Canada saw $896 million invested across 144 VC deals, according to the Canadian Venture Capital and Private Equity Association’s latest report. On both fronts, these numbers represent a steep year-over-year decline compared to what was an especially hot Q3 2021 and Q3 2019 for Canadian VC funding. WorkJam closed a US$50 million round. Shopify saw bigger Black Friday orders, and more in-store sales versus last year. Converge Technology announces commencement of strategic review process to maximize shareholder value. Coupa Software shares surged on a report of interest from Vista. Activision stock falls after report says watchdog will block Microsoft deal. Berkshire has cut it BYD stake by 22%, made US$1.2 billion profit. DraftKings stock falls after report cites cases of unauthorized account withdrawals. More than 20,000 employees at Apple Inc supplier Foxconn’s huge Chinese plant, mostly new hires not yet working on production lines, have left, a Foxconn source familiar with the matter told Reuters on Friday. Google has a secret new project that is teaching artificial intelligence to write and fix code. Amazon plans to invest US$1 billion a year in movies for theaters. Bob Iger is returning to head Disney as Bob Chapek steps down. Thanksgiving 2022 online sales pip past forecasts at US$5.3 billion, up 2.8% on last year, mobile accounted for 55% of all purchases. Domino’s is rolling out over 800 Chevy Bolt pizza delivery EVs.

Invesment News in the Past Weeks

December 19, 2021: Patiently Waiting For Santa Claus Rally

December 19, 2021: Patiently Waiting For Santa Claus Rally

The last few months have brought significant uncertainty to public markets. However, despite all this uncertainty the broader markets continue to perform quite well. In this context, despite a continued melt-up for mid-cap and large cap U.S. listed stocks, small-cap stocks have not performed as well. This divergence appears to have worsened this year’s tax loss selling. In our latest Sophic Capital Inc. piece, we highlight a number of small cap Canadian innovation stocks, which could benefit once tax loss selling subsides. Sophic Client, Reklaim (MYID-TSXV) featured in the Wall Street Journal. In a piece, highlighting a handful of business leaders, politicians, and startups, such as Brave Software Inc., Reklaim Ltd. and Streamlytics Inc., seeking to empower consumers to control and benefit from the personal data that the technology industry collects on individuals every day. US software bosses have cashed in hundreds of millions of dollars of stock. The race to cash in comes as the US Securities and Exchange Commission is looking to tighten the rules around sales by corporate insiders. Reddit Inc., the social media site that helped fuel the stock market meme-trading frenzy, said it has filed confidentially for an initial public offering. Buy now, pay later service Affirm fell more than 15% on Thursday as the Consumer Financial Protection Bureau announced an inquiry into the fast-growing segment of the consumer finance market. Oracle Corp. is in talks to buy electronic-medical-records company Cerner Corp., according to people familiar with the matter, a deal that could be worth around US$30 billion and push the enterprise-software giant further into healthcare. Nike is taking a plunge deeper into the world of crypto collectibles, announcing that they’re acquiring the NFT studio RTFKT (pronounced “artifact”).

December 12, 2021; Expect Better January Effect After More Pronounced Tax Loss Selling Season?

December 12, 2021; Expect Better January Effect After More Pronounced Tax Loss Selling Season?

Nearly two-thirds of tech companies that went public via IPO this year are trading below their IPO price, according to data provided by Dealogic. The weak performance is a reflection of both the market, which has turned jittery over the past few months, and the massive increase in the number of companies going public. Of the 132 tech IPOs, 85 are trading below their IPO price as of the close of the market Monday. Looked at another way, the stock prices of newly public tech companies rose an average of 24% a month after their IPO this year, compared to 41% last year. And as time went on, this year’s offerings performed even worse. This lack lustre performance extends to small cap Canadian listed stocks as well, Sophic Capital looked at the performance of tech and tech adjacent, sub $100 million market stocks as of Nov 30th; we found that the median stock is this group is trading ~65% below its 52 week high, which makes this year’s tax loss selling even more pronounced than usual. The jury is still out on whether this will lead to  a better January effect. Against this backdrop, companies continue to execute, last week, EMERGE (ECOM-TSXV) achieved record Gross Merchandise Sales of $10 million in November 2021, exceeding entire reported GMS from Q3 2021. A few weeks ago, Sophic Client Clear Blue Technologies (CBLU-TSXV), provided a bullish outlook, as customer planning for telecom system rollouts and wireless lighting construction planning for 2022 is very active. In the USA, SEC Chair, Gary Gensler signaled tighter SPAC regulations could be coming soon. China is preparing a blacklist of which kinds of tech companies won’t be able to use VIEs to raise foreign capital and sell shares abroad, but it will likely grandfather in companies that have already used the legal structure to bypass rules banning foreign investment.

December 05, 2021: Notable Canadian VC Deals Announced, Tumultuous Week For Tech Stocks

December 05, 2021: Notable Canadian VC Deals Announced, Tumultuous Week For Tech Stocks

This past week witnessed several high profile Canadian VC financing announcements, even as US VCs and Hedge Funds propelled first 9-month Canadian VC to new record $10.7 billion. In their quest to develop commercial fusion power, General Fusion just reached another milestone with what it is describing as an oversubscribed $166 million Series E funding round. This is the second Series E funding round that the company has announced. Klue scored a$79 million from Tiger Global, Salesforce Ventures (October). We introduced Sophic client Swarmio Media (SWRM-CSE); Swarmio not only provides edge computing solutions for gaming but also the means for telco operators to build something demanded by the Gen-Z gamer: community. US and globally listed tech companies had a tumultuous week, as Ride-hailing giant Grab slumped 23% in its Nasdaq trading debut after blockbuster SPAC deal. India’s ride-hailing app Ola plans IPO in first half of 2022. Chinese ride-hailing giant Didi Global said it would delist from the New York Stock Exchange and start preparing for a listing in Hong Kong. Cathie Wood’s ARK Invest snapped up nearly US$49 million worth of Twitter shares on Tuesday, taking advantage of a slide in the stock after CEO Jack Dorsey said he would step down as CEO. Microsoft CEO Satya Nadella sold half of his stake in the company in a series of transactions last week, divesting about 840,000 shares for a total of more than US$285 million. Apple warned suppliers about diminishing iPhone 13 demand due to wait times during chip shortage.

November 28, 2021: Light Capital Markets Activity In U.S. Holiday Shortened Week

November 28, 2021: Light Capital Markets Activity In U.S. Holiday Shortened Week

With relatively light small cap Canadian capital markets activity last week, combined with market turbulence, Hootsuite eyes 2022 as “window has closed” for new Canadian tech IPOs. Constellation Software launched a $200 million venture capital fund, called VMS Ventures, saying it will finance startups and rapidly growing vertical market software businesses. In a crowded global market, Canadian AI startups’ fundraising results stand out. Tesla CEO Elon Musk sold another 934,091 shares of the electric vehicle maker worth US$1.05 billion after exercising options to buy 2.15 million shares, US securities filings showed on Tuesday. China’s tech crackdown continued, as the government asked Didi Global to devise plan to delist from U.S., China’s market regulator have ordered Alibaba, Tencent, Baidu and other companies to pay a total of about US$3.4 million in penalties for 43 cases of antitrust violations regarding their past acquisitions and other deals. Noted Apple analyst Ming-Chi Kuo says the company will launch a new AR headset in 2022, he also predicts that the iPhone will live for as long for 10 more years, and after that will be replaced with AR. Online retail sales over Thanksgiving came in at a disappointing US$5.1 billion, as product shortages and limited discounting may have dampened excitement. According to data from Adobe Analytics. Crypto exchange Binance has been in talks with sovereign wealth funds about potentially taking a stake in the company. The metaverse has the potential to become a US$1 trillion annual revenue opportunity according to a report from crypto giant Grayscale.

November 21, 2021: News Filled Week For Global Innovation Companies, Markets At A Turning Point?

November 21, 2021: News Filled Week For Global Innovation Companies, Markets At A Turning Point?

WELL Health (WELL-TSX) announced a $65 million bought deal offering of convertible debentures, and CubicFarm (CUB-TSX) announced $20 million bought deal public offering of common shares. Sophic Client, Clear Blue Technologies (CBLU-TSXV) closed a convertible debenture financing for $4.4 million, exceeding the company’s funding goal. EMERGE Commerce (ECOM-TSXV) entered the B2B space with the purchase of WholesalePet.com for up to $31.2 million. Cboe Global Markets agrees to acquire NEO, strengthening global equities offering. Canadian SaaS funding in 2021 rebounded from a 2020 low, fuelled by influx of US investors. Affirm stock dropped after BNPL company announced plans for a convertible offering. MercardoLibre stock sinks after equity offering priced at a 5.1% discount. India’s Paytm dropped 26% in its first day of trading. Online mattress seller Casper Sleep agreed to a buyout offer from investment firm Durational Capital Management, ending Casper’s disastrous stint as a public company. Qualcomm stock hit a record high after it said it will grow without Apple. Alibaba Group slashed its revenue guidance for the full fiscal year, as the e-commerce giant grapples with China’s slowing economic growth and Beijing’s regulatory crackdown on the internet sector. Crypto-focused VC firm Paradigm said Monday that it had raised a US$2.5 billion venture fund, the industry’s largest to date. The new fund surpassed the US$2.2 billion crypto fund Andreeseen Horowitz announced in June. Apple now believes it can ship self-driving EV as soon as 2025, Bloomberg reports. Ford and Rivian have abandoned a plan they had to jointly develop an EV together.

November 14, 2021: Very Busy Week In Canadian Capital Markets For VC Funding, Public Financings, M&A

November 14, 2021: Very Busy Week In Canadian Capital Markets For VC Funding, Public Financings, M&A

This past week was notably busy in Canadian capital markets, witnessing lots of activity in VC and, public markets funding as well as M&A. Long time Canadian software behemoth, Open Text announced a US$1 billion debt financing, and a nearly half a billion US$ acquisition. Satellite communications company Telesat filed to go public on the TSX. Moving to small cap stocks, EMERGE (ECOM-TSXV) announced the refinancing of a term loan and upsizing of its credit facility to $25 million. Sophic Client UGE International (UGE-TSXV) announced the closing of a $2 million Convertible Debenture offering. SoftBank announces a US$8.8 billion share buyback after losses on Didi and Coupang. Sweetgreen’s IPO filing suggests tech enabled businesses could be valued at ~7-9x sales. Elon Musk sold US$5 billion in Tesla stock, but he made plans weeks before asking his Twitter followers whether he should sell 10% of his shares. Apple supplier Foxconn, forecast on Friday that a global chip shortage would run into the second half of 2022 and Sony cut its PlayStation 5 production on chips shortage. During an interview, Apple CEO Tim Cook said he owns cryptocurrency, and Apple ‘looking’ to add it for Apple Pay.

November 07, 2021: Mixed Canadian Capital Markets Week, With A Couple Exits And An IPO Delay

November 07, 2021: Mixed Canadian Capital Markets Week, With A Couple Exits And An IPO Delay

Last week saw a few high profile exits and an IPO delay in Canada. Ecobee is being acquired by US-based Generac for US$770 million. Quebec City-based artificial intelligence retail tech startup, Coveo filed to go public on the Toronto Stock Exchange under the ticker ‘CVO’. Montréal-based Sharethrough has postponed its IPO on the Toronto Stock Exchange. Sophic Client, GameSquare Esports (GSQ-CSE, Sophic Client) received mention in the Washington Post, referencing streamer TimTheTatman joining its Complexity unit. In the USA, Rivian plans to sell a portion of its US$60 billion IPO directly to SoFi users. Cloud software firm HashiCorp filed to go public and Cloud-based expense management software maker Expensify plans to raise up to US$242.5 million in an IPO. Zillow now looks to sell 7,000 homes for US$2.8 billion, and Cathie Wood’s Ark sold 3.9 million shares of Zillow on Wednesday as the company’s exit from home-flipping sent shares plunging. The US House passed a more than US$1 trillion bipartisan infrastructure bill late Friday. The Senate approved the revamp of transportation, utilities and broadband in August. Lastly, the global chip shortage ‘is far from over’ as wait times get longer.

October 31, 2021: Toronto Tech Startups Once Again Broke Venture Funding Records

October 31, 2021: Toronto Tech Startups Once Again Broke Venture Funding Records

We got additional colour last week around D2L and Hootsuite going public in the coming months — Canadian tech companies who’ve long been speculated to go public for a number of years. Voyager Digital (VOYG-TSX) secured a $75 million strategic investment from Alameda Research, and Mark Cuban’s Dallas Mavericks said they’ll give US$100 in bitcoin to people who download the Voyager Digital app this week. Shopify (SHOP-NYSE, SHOP-TSX) announced partnerships with Microsoft and Mailchimp. Sophic Client, Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA), closed a convertible debenture financing for $1.5 million. We published our second CEO interview with Sophic Client, HempFusion (CBD.U-TSXV). Toronto tech startups once again broke venture funding records, raising over $1.6 billion through 53 deals in Q3 2021. Per Hockeystick and briefed.in data, Toronto tech funding has soared to a new record in every quarter of 2021 so far. Outside Canada, GlobalFoundries and major shareholder Mubadala Investment Co. raised almost US$2.6 billion in an initial public offering, pricing the chipmaker’s shares at the top of a marketed range. Paytm seeks US$20 billion valuation in India’s biggest IPO. FaZe Clan to go public through acquisition by SPAC, valuing company at US$1 billion. Mastercard will allow US banks and millions of merchants to integrate crypto into their products, via a partnership with Bakkt, a digital asset platform. Shares of Bakkt soared as much as 94% to US$17.71 before paring the rise to 78%. In the semiconductor space, while Apple lost US$6 billion to chip shortages and manufacturing delays in Q4, Samsung reported record quarterly revenue on strong chip demand.

October 24, 2021: Small Cap Innovation Stocks Catching A Bid?

October 24, 2021: Small Cap Innovation Stocks Catching A Bid?

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.

October 17, 2021: Record U.S. VC Exits In 2021

October 17, 2021: Record U.S. VC Exits In 2021

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.

October 10, 2021: Good Canadian Public Markets Activity After A Few Quieter Weeks

October 10, 2021: Good Canadian Public Markets Activity After A Few Quieter Weeks

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.

October 03, 2021: OK Public and Private Capital Markets Activity Given Recent Volatility

October 03, 2021: OK Public and Private Capital Markets Activity Given Recent Volatility

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.