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Why Shopify’s IPO is a defining moment for Canadian technology


ShopifyThe knives were sharpened and ready to cut.

The night before Shopify was to make its long anticipated debut on the NYSE and the TSX, I was in Toronto, and the following morning’s proceedings were on everyone’s lips.

It was not all positive.

“They’re going to get hooped,” said one fund manager over a vodka soda and salmon canape at an upscale mixer. Except he didn’t say “hooped”, to be precise. He said a word that rhymed with “plucked” and “hucked” and “chucked”.

He explained that the bankers involved were intent on pressing the price of the offering to its maximum, leaving no room for retail investors to enjoy any upside after the stock began trading.

This kind of backroom trickery has been a major topic of discussion around every notable tech IPO since Facebook stumbled out of the gate on May 18, 2012 and it was later revealed that tony clients of firms like Goldman Sachs and Morgan Stanley made out like bandits because their elite status enabled them to secure cheap paper not available to the general public, making the company’s dicey entry into the public markets almost irrelevant to them.

“Stupid, shortsighted greed,” said the fund manager, exhaling.

Shopify doesn’t operate in the rarefied air of Facebook, but the action on the financing followed the same pattern in the days leading up to the event. The company increased the range of its IPO to (U.S.) $17.00, from the $14.00 to $16.00 range it had initially guided, and expanded its financing to $131-million, instead of the previously announced $100-million.

The maneuverings in the hours before had, according to some, all the hallmarks of a disappointing day for Tobias Lütke and company in New York Thursday, where they were to ring the opening bell at the NYSE.

But that didn’t happen.

Instead, Shopify raced out of the gate like Preakness and Kentucky Derby winner American Pharoah, piling on nearly $700 million in market cap and ending the day up more than 50 per cent. On Friday, the stock tacked on another 10 per cent gain, just to prove the previous day wasn’t a fluke. It was a remarkable debut for what was the first major IPO candidate out of the gate in a class of Canadian tech companies that I consider our best ever by a mile.


On the day Shopify IPO'd, D2L's John Baker (left) and Difference Capital's Tom Liston (centre) were early to digest the ramifications of its success.
On the day Shopify IPO’d, D2L’s John Baker (left) and Difference Capital’s Tom Liston (centre) were early to digest the ramifications of its success as a public company.


Thursday was the greatest day in a generation for Canada’s long suffering technology sector. Instead of a round of “I told you so’s” and proclamations of a tech bubble from frustrated and vindictive resource investors, we have an event that has the ability to resonate not only in boardrooms and trading pits, but around kitchen tables and backyard barbecues and soccer practices. Tech is, truly and finally, back.

Technology has outperformed the TSX for three years now, but it’s been a resurgence that has never seemed able to open the throttle and go. Stocks like Amaya, Constellation Software, and Avigilon have remarkably, relentlessly and deservedly pushed their way to billion dollar valuations, but ask ten people on the street who those companies are and, outside of six blocks in Toronto’s financial district, you’ll get ten blank faces.

That’s a problem that could be solved by the players on deck.

As Shopify was tracing higher on Thursday, two of the people who had the most at stake were queried about it. In Vancouver, Ryan Holmes, the brilliant, bearded-and-skinny-jeaned founder of Hootsuite, was speaking at a Canadian Venture Capital Association conference and said the result of Shopify’s IPO might make him think about moving his IPO window forward.

“The Shopify deal definitely has created a lot of buzz and really got our team thinking about timing on an IPO,” he said. “I think within the next 12 to 18 months we’re targeting as a time frame where we could be ready to come out if the markets look good. With IPOs, you want to have a number of events connect and converge at the perfect time.”

In Toronto, John Baker, the founder of D2L (formerly Desire2learn) was on a panel called “Canada’s Next Billion-Dollar Tech Company” at the Bloomberg Canada Economic Summit.


ryan holmes
Hootsuite CEO Ryan Holmes: “The Shopify deal definitely has created a lot of buzz and really got our team thinking about timing on an IPO.”


“I think it does a lot to help with the confidence, there’s no question,” said Baker of Shopify. “Great story, a company that built a solid business, going through a lot of great growth and they’re leading a path for other young entrepreneurs that are building these tech companies to really bet for that being an outcome versus the traditional path for tech in that small to medium sized market in Canada.”

Difference capital Managing Partner Tom Liston, who was on the panel with Baker, appeared on BNN Friday to talk about a list of five companies that could soon follow Shopify to the public markets, including Vision Critical, Real Matters, and BuildDirect.

Asked which company would be the next to take the plunge, Liston said the race was wide open.

“It’s probably anyone’s guess,” he said. “But all five of those could tomorrow easily if they wanted to raise fifty or a hundred million. Certainly the quality is there. They could, in many cases, cross-list tomorrow.”

Over the past several years Canada’s private technology companies have enjoyed a much higher profile than our public ones. There’s a reason: they are sexier and as such get as much attention in Silicon Valley as they do here. Hootsuite has a product that is employed by The White House. Shopify’s platform is used internationally by 165,000 merchants. D2L promises to overhaul the very way education happens. BuildDirect is threatening to disrupt giants like Home Deport and Lowes. Vision Critical counts Banana Republic, JetBlue and John Deere as clients. And in case you think there is more sizzle than steak here, all these companies have revenue that is reported to have surpassed the $100-million mark.

In 2000, Ottawa’s Nortel had a market value of $350 billion. At one time, the company represented 36% of the entire value of the Toronto Stock Exchange and employed 90,000 people. But a storied flameout reduced it, and the idea that Ottawa might someday become Silicon Valley North, to rubble. By 2008, Blackberry (then known as Research in Motion) had a market cap of $83-billion and a dominant position in the mobile market.

We all know how that turned out.

But that won’t happen this time. The depth and breadth of techs that are on deck is like nothing we have seen before, and it will change the fabric of the public markets here. Hootsuite and and D2L should IPO. Right now. As should BuildDirect, Vision Critical and Real Matters. Why? Because they will soon be pressed from behind. Names like Slack, Vidyard, Wattpad, Cymax, Thalmic Labs, Elastic Path, Clearpath Robotics, Top Hat, BusBud, ScribbleLive, and scores more, are waiting in the wings.

Veteran banker and former sell-side analyst Barry Richards of Paradigm Capital says what he is seeing is something that will amount to a long and sustained wave of new offerings.

“Shopify is only the tip of the iceberg!” says Richards. “The beginning of a new wave of new technology leaders coming to the public markets that have been incubating for the last 10-15 years. This wave of next generation companies is vast, covering a wide range of technologies but led primarily by software developers. This is an incredibly exciting time for privately held technology companies and we should should see more tech IPOs in Canada than at any other time history.”

Meanwhile, Lütke says it’s finally time for Canada to shake off its inferiority complex in the tech space.

“We have a lot of really great companies in Canada and I think there’s always been this fear that great in Canada doesn’t mean great on a world stage. We need more self-confidence,” he said. “We are building incredibly good businesses with incredibly good people, being loyal, dedicating themselves to solving important problems. Canada just needs to tell people: You know what? The best way to do it is just be in front of people and get out there and do this sort of thing.”

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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