The first big Canadian tech IPO since Vancouver’s Avigilon will begin trading tomorrow, when Ottawa-based Halogen Software begins life under the ticker symbol “HGN”.
But with a TSX tech sector that is on steroids of late, Halogen Software, a cloud-based provider of employee performance appraisals, likely won’t have to wait as long for company as Avigilon did.
After closing 2012 as the top performing sector on the TSX and TSXV, tech is out of the gate with a huge lead in 2013. The tech sector has increased by 20% this year, growing to $54-billion in market value. Tech is up 46% since the start of 2012, and its issuers have raised $1.6-billion in that period of time.
BMO technology analyst Thanos Moschopoulos says the rise in Canadian tech can be partially linked to its resurgence on the Nasdaq, but there’s another factor at play here.
“The current challenges in some of the resource sectors have likely prompted investors to take a closer look at opportunities elsewhere, and I’ve definitely seen a stronger level of investor interest in the Canadian tech space, particularly in the last three months,” he told Cantech Letter today.
Most stocks are still trading at multiples that are well below pre-recession levels…
Moschopoulos says that after several years of being largely overlooked, Canadian investors are turning to our own tech sector, where he says the names have been performing well, with fewer earnings misses than their counterparts to the south.
“The sector was cheap for a long time,” he adds. ” It’s not quite as cheap as it was, although most stocks are still trading at multiples that are well below pre-recession levels, and so we continue to see upside for a number of our names.”
Interest in the sector is not going unnoticed by Bay Street pros, where a once irrelevant space is showing signs of life again.
“I’m definitely seeing more tech deal flow than I have in a while,” says Paul Rajchgod, Managing Director, Investment Banking for Cantor Fitzgerald Canada. “Clearly the excellent performance of many companies in the tech sector is a key factor. A lot of our tech clients’ share prices are at 52-week or even multi-year highs, and this has not escaped the attention of institutional investors.”
Michael Kousaie, the Head of Business Development, Technology & Clean Technology for the TSX says the sector rotation is really a flight to quality. “The bottom line is that investor appetite for good quality companies remains strong,” he says, “and large and small-cap issuers looking to raise growth capital continue to be attracted to the Canadian market.”