The window, at last, could be opening.
If you’ve got your ear close to the ground on Bay Street, you might have heard rumblings that two Canadian-based tech initial public offerings are moving to the launch pad.
First up may well be Halogen Software, an Ottawa-based software company in the human resource talent management space. We’ve been fans of the story since 2006, and they have generated impressive growth over the past few years. The company is backed by JMI Equity of Baltimore, which is a very successful growth equity investor with a penchant for Canadian management teams. Eloqua being an example of a huge recent JMI-Canadian win (see prior post “Eloqua’s pending NASDAQ IPO a secret Toronto success story” July 23-12). It would be smart for JMI to test out the TSX for a change, rather than wait for Halogen to be so-called NASDAQ-ready. I think Halogen would get plenty of attention in its domestic market given the high quality of the story and the paucity of public tech software names in Canada right now.
The other name in the queue is Virgin Gaming, which is as much a business model play as it is a tech company. Backed by Difference Capital (DCF:TSXV), Virgin Gaming has partnered with Microsoft and Sony to allow gamers to win money based upon their prowess in the virtual universe.
A private co. called Groove Games failed miserably a few years ago after raising maybe $50 million locally in the hopes of building a successful MMOG community. Virgin Gaming’s approach has involved less risk, as it has leveraged off the development spend of some of the biggest gaming names in the world, including Electronic Arts. You can get a sense of the excitement from this 2011 video by Clever Games. For Difference Capital, with $19.9M invested in the story to date (of Difference’s $85.6 million of share capital as of Sept. 30/12), this could be a great test of the budding merchant bank’s capacity to arbitrage the private/public marketplace. Virgin Gaming presented at the September 2012 Cantor Fitzgerald tech conference (see prior post “Cantor Fitzgerald Tech Conference” Sept. 27-12), and seemed to be very much primed for a roadshow, even then. Virgin Gaming’s key investors get a 10% penalty on their June 2012 convert deal if the company isn’t liquid by Sept. 5, 2103, so the timing makes sense.
With the Dow Jones approaching its all-time high, and U.S. interest rates destined to be low for the forseeable future, investors might be ready for some growth names. Time will tell whether or not the dealers have found the right names to follow the success of Q9 and Constellation Software (see prior representative posts “$1.1B Q9 Networks deal another reminder that Canadian markets don’t get tech” June 4-12 and “Belair / Ericsson deal a wake-up call for every Institutional Sales Desk” Feb. 22-12), but it is exciting that folks are considering giving it the “ole college try”.
That alone is a great sign, and hopefully will generate some buzz as other dealers put their thinking caps on and call any one of: Achievers, Beyond The Rack, BTI Systems, Hootsuite or Vision Critical.
(disclosure: never forget that this post, like all blogs, is an Opinion Piece and that I’m not licenced to give investment advice!; BTI and Vision Critical are portfolio companies of Wellington Financial Fund III, while BTR is in our Fund IV)