Investors have driven the TSX tech component ahead by nearly 27 per cent year to date.
Michael Lewis Business Reporter, Published on Thu May 23 2013
Cooling commodity prices are helping fuel investor interest in emerging tech companies, with Vancouver’s SoMedia planning an initial stock offering that is says would be the first Canadian Internet technology debut on the junior TSX Venture Exchange since 2001.
“Our timing is just phenomenal,” said SoMedia founder and CEO George Fleming, who is meeting with investors to drum up interest in advance of a final IPO prospectus before an initial listing planned by mid June.
After a pullback in new issues over the past few years amid booming commodity prices and resource company valuations, he said tech stocks are back in focus.
Weakening commodities demand from developing countries including China amid lower economic growth have helped push the gold and metals-weighted materials index of the TSX down by more than 23 per cent in 2013, while investors have driven the TSX tech component ahead by nearly 27 per cent year to date.
Analysts said a cooling residential real estate sector could impact real estate investment vehicles and add to the appeal of emerging tech companies, noting that the tech sector began to show strength in the second half of 2012 and has continued the resurgence into 2013.
BMO technology analyst Thanos Moschopoulos said institutional investors have also been impressed by the earnings performance of established Canadian tech enterprises including software maker Open Text and IT consulting firm CGI.
He said most TSX-traded tech stocks remain at multiples below their level before the 2008 recession, adding that the success of two recent tech IPOs suggests there will be more to come.
Investors have noted the performance of Ottawa-based cloud-based employee management software maker Halogen Software Inc., whose stock jumped 17 per cent in its first day of trading in Toronto earlier this month in an IPO that generated proceeds of $55 million.
Vancouver-based video surveillance company Avigilon Corp.’s shares are up more than 230 per cent since it went public in November 2011 in an IPO that raised more than $25 million including proceeds from a secondary offering, while Toronto-based semiconductor company ViXS Systems has said it is planning a stock offering.
Fleming, meanwhile, said a final prospectus for the SoMedia IPO will be filed with Canadian securities regulators within 10 days to provide a price range for the new shares among other details.
The company’s offering is backed by Toronto-based Difference Capital Funding Inc., a new merchant bank that raised more than $85 million last year to invest in emerging Canadian technology companies.
Fleming said SoMedia, founded in 2006, and with about 40 employees, plans to use proceeds from the offering to tidy up its balance sheet and add sales and marketing staff.
He said the company used the lull in tech IPO interest to raise more than $12 million from private Canadian investors and build a globally scalable Internet video content production platform for business to serve a growing market, particularly in the U.S.