Going public is falling out of favour, creating additional opportunities for private-market investors
More and more companies, especially in the tech space, are choosing to stay private rather than going public. According to a report from EY, IPO activity in 2016 declined year-over-year: A total of US$132.5 billion was raised over 1,055 IPOs, compared to the US$197.1 billion raised in 2015 over 1,258 public-market debuts. Canada had a significant reduction – the most recent annual PwC report on IPOs showed only eight new issues over all the country’s stock exchanges last year, representing a 19-year low.
Driving this trend is the fact that private investors have become more willing to fund late-stage companies. Lower operational cost pressures are also allowing startups to reach profitability without tapping into public markets. And record-low interest rates have let companies use debt financing to fund their expenditures without feeling much of a sting.
In Canada, other factors come into play. The economy’s reliance on commodities means that IPO activity has historically been tied to the oil sector, which has not yet fully recovered from the oil price plunge in 2015. Technology is Canada’s other major area of
opportunity, but with geopolitical risks fresh in investors’ minds, their appetite for backing young and disruptive firms is limited.
Seizing on this trend, Calgary-based equity administration software provider Solium recently entered into a preferred partnership with Nasdaq Private Market. Using Solium’s Shareworks platform, private companies served by NPM will be able to
manage their cap tables and share plans, as well as access Nasdaq Private Market’s secondary liquidity technology.
“With the proliferation of companies choosing to remain private longer, private company investors and employees are increasingly seeking a mechanism that enables them to have liquidity events,” said Solium CEO Marcos Lopez. With a well managed fintech solution, secondary liquidity can be achieved via trading of private shares.
Current NPM customers using Exact Equity software can migrate their cap tables and share plans onto the Shareworks platform. NPM and Solium will collaborate closely to make sure their respective customers can maximize the benefits offered by the partnership.
Driving this trend is the fact that private investors have become more willing to fund late-stage companies. Lower operational cost pressures are also allowing startups to reach profitability without tapping into public markets. And record-low interest rates have let companies use debt financing to fund their expenditures without feeling much of a sting.
In Canada, other factors come into play. The economy’s reliance on commodities means that IPO activity has historically been tied to the oil sector, which has not yet fully recovered from the oil price plunge in 2015. Technology is Canada’s other major area of
opportunity, but with geopolitical risks fresh in investors’ minds, their appetite for backing young and disruptive firms is limited.
Seizing on this trend, Calgary-based equity administration software provider Solium recently entered into a preferred partnership with Nasdaq Private Market. Using Solium’s Shareworks platform, private companies served by NPM will be able to
manage their cap tables and share plans, as well as access Nasdaq Private Market’s secondary liquidity technology.
“With the proliferation of companies choosing to remain private longer, private company investors and employees are increasingly seeking a mechanism that enables them to have liquidity events,” said Solium CEO Marcos Lopez. With a well managed fintech solution, secondary liquidity can be achieved via trading of private shares.
Current NPM customers using Exact Equity software can migrate their cap tables and share plans onto the Shareworks platform. NPM and Solium will collaborate closely to make sure their respective customers can maximize the benefits offered by the partnership.
