Halifax startups find funding success by going public

Posted: July 13, 2021

Avery Mullen

After distinguishing itself as a rare bright spot amidst the economic upheaval of the past year, Halifax’s innovation community is displaying one of the hallmarks of a mature ecosystem: publicly traded companies.

In just a handful of years, publicly listed companies have become, not only one of the most valuable and generative corners of the ecosystem, but also one of its fastest-moving.

“There are more viable paths to funding our startups than just the traditional venture capital route,” said Andrew Ray, Vice President of Investment for Nova Scotia venture capital crown corporation Innovacorp. “We view this as another path to financing these companies.”

For most of the past decade, Atlantic Canadian startups have mostly preferred funding from sources like venture capital or angels, eschewing stock exchanges. But in 2018, Entrevestor began tracking stock market funding in its annual data report, as a small, but not insignificant number of companies began to tap into public markets.

By 2020, stock markets had become a major force in equity funding. Three Halifax companies raised a total of $54.7 million: pharma companies Appili Therapeutics and IMV, and medtech specialist Sona Nanotech. All of these are life sciences companies that were working on drugs or products that could help address the COVID-19 pandemic.

Entrevestor – which analyzes data on startups across Atlantic Canada – found that Halifax companies raised a total of $121.7 million in capital in 2020. So publicly listed companies accounted for 45 percent of the total capital raised.

Appili Therapeutics was a particularly strong performer that year. In September, after 15 months on the TSX-Venture, it moved to the exchange’s main board. The TSX-Venture is an exchange that targets young companies, so when the company moved to the TSX proper, it cemented its status as a serious player in the pharmaceutical industry.

Appili currently enjoys a market cap of just under $44 million -- down from $65.9 million when it moved to the TSX, but still a substantial valuation for a company founded just six years ago.

Dartmouth’s IMV, meanwhile, booked three years in a row of eight-figure raises with the help of listings on the TSX-Venture and Nasdaq. In 2018, it raised $14.4 million, in 2019, it raised $29.5 million and in 2020, a private placement sale of shares saw it raise another $25.1 million.

And in June, Metamaterial, another Dartmouth company, began trading on the Nasdaq stock exchange thanks to a reverse acquisition of a Texas energy company.

An attempted short squeeze by retail investors in the days leading up to the acquisition left the stock fluctuating wildly. But when the shares debuted under their new ticker symbol, Meta became Atlantic Canada’s first publicly traded unicorn -- a startup valued at over $1 billion. It opened with a $2.7 billion market cap, and despite its shares falling since then, it remains in unicorn territory.

Meanwhile, video game technology company Swarmio Media, which has offices in Halifax, Sydney and the Toronto area, is preparing to go public on the Canadian Securities Exchange.

The deal will involve a labyrinthine series of financial maneuverings, including a holdings company, a reverse takeover and the already completed private placement sale of shares, rather than a more traditional initial public offering. If the listing goes according to plan, Swarmio will raise $5 million.

“I've already had conversations with one of our portfolio companies who are asking questions...” said Innovacorp’s Ray in an interview about the Meta listing. “And we have other companies who are looking at doing similar sorts of things and learning from this experience.

“We've had a lot of learning over the last year with Metamaterial, with them on the CSE (Canadian Securities Exchange) and with them now on to the Nasdaq. And that's going to make it easier and a more viable option for our portfolio companies to raise money.”



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