Coveo trades up in TSX debut, latest Canadian tech company to go public in mixed year for new issues

Louis Tetu, the CEO of tech company Coveo.Renaud Philippe/The Globe and Mail

Coveo Solutions Inc. had a modestly successful debut on the Toronto Stock Exchange Thursday as the enterprise software provider extended 2021′s record levels of fundraising by Canadian tech firms.

Subordinate voting shares in the Quebec City company, led by serial entrepreneur Louis Têtu, opened at $16.05, up from the $15 issue price set the previous evening in the $215-million initial public offering. The stock briefly hit $18 in early trading, before settling back and closing at $16.20, or 8 per cent above its issue price. That gave Coveo a market capitalization of $1.77-billion. The offering, which formally closes next week, was co-led by BMO Nesbitt Burns, Merrill Lynch Canada, RBC Dominion Securities and UBS Securities Canada.

While Coveo’s first-day performance was nowhere near the spikes commonly seen in debuts by U.S. tech companies, it makes the company one of three Canadian tech issuers to enjoy a positive first trading sessions this fall, along with Copperleaf Technologies Inc. and Propel Holdings Inc.

Another three – D2L Corp., E Automotive Inc. and Q4 Inc. – traded below the issue prices of their fall IPOs, while Montreal online advertising company Sharethrough this month delayed plans to go public in response to the soft market reception for several Canadian tech IPOs.

Coveo is the 20th Canadian tech IPO on the TSX to raise $50-million or more since July, 2020. By contrast, there were 12 Canadian tech IPOs on the TSX in the 11 years ended December, 2019. According to TMX Group, technology companies have raised $12.8-billion on their TSX and TSX Venture exchanges as of Oct. 31, better than the previous full-year record set in 2020. Companies in the “innovation” category – which includes software, clean technology and biotechnology – account for 70 per cent of the funds raised by all companies in 2021 TSX IPOs.

Despite the record year, the performance of Canadian tech companies that have gone public during the pandemic has lagged overall markets. One, MindBeacon Holdings Inc., agreed this week to sell out to TSX Venture-listed CloudMD Software & Services Inc. for $4.78 a share, barely half its $8-a-share issue price when it went public on the TSX 11 months ago.

Despite the mixed results, “ultimately we’d say it’s a huge success,” said Dani Lipkin, director of global business development with TSX parent TMX Group, of the overall performance by publicly listed Canadian tech firms this year. He added that the S&P/TSX technology subindex has generated average returns of 24 per cent over the past decade and 30 per cent so far this year. “We don’t evaluate the success or failure of an IPO within the first few days of trading or how it comes out of the gate. We always look at the long-term view.”

Publicly traded innovation companies on Canadian exchanges now have a combined market capitalization of $420-billion, up from $80-billion five years ago, he added. “This is monumental success over all, no matter how you look at it. It’s something we should all celebrate as Canadians.”

Like Copperleaf, Coveo benefited from significant demand as each company attracted more than $1-billion in orders after their IPO roadshows. That prompted Coveo to price the offering at the top end of its $13-to-$15-a-share price range.

Coveo sells artificial-intelligence-powered technology known as “insight engines” to more than 475 customers, including BlackBerry, Salesforce, Lee Valley, BRP and Xero, that offer the same kind of personalized search results on their websites as those powered by Google or Amazon. Mr. Têtu’s previous company, Taleo Corp., was purchased by Oracle for US$1.9-billion.

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