The Canadian tech company that bucked the trend in IPOs’ year of disaster
Listing on the public markets isn’t exactly fashionable these days, with many tech firms opting to avoid the scrutiny by sticking to private equity and venture capital for funding for as long as they can.
Not so for Montreal-based Lightspeed POS Inc., a provider of cloud-based retail point-of-sale software that went public last year and has been on solid run ever since.
“We did not have investors or any kind of pressure for us to do a public listing,” chief executive Dax Dasilva told the Financial Post during an interview Tuesday. “In fact, some of our larger investors said that this company can achieve everything it needs to, and we’re happy to continue to fund it.”
As the company prepares to mark the one-year anniversary of the announcement of its preliminary prospectus next week, Dasilva said that the public listing has been useful for Lightspeed for a number of reasons.
The company has since completed four acquisitions as part of its global expansion strategy, something made possible in part by the currency of public stock the IPO provided.
Dasilva also said the company wanted the publicity that comes from a IPO, especially insofar as it aspires to be a global brand.
Lightspeed specializes in point-of-sale software for small merchants with complex needs. The company’s typical client might be a boutique hotel with a restaurant attached to it, where the POS solution has to handle bookings, dinner reservations, maybe an e-commerce element and other quirks.
In May, Lightspeed acquired Chronogolf Inc. for around US$10 million, a company that offered cloud software focused on facilities management of golf courses. Then in July they bought iKentoo, a point-of-sale company with customers in France, Switzerland and South Africa, for US$18.5 million and 400,000 shares in Lightspeed stock.
Next came Kounta Holdings Pty Ltd in Australia and New Zealand for US$43-million and then earlier this month Lightspeed bought German company Gastrofix for US$100 million. Both deals were done with a combination of cash and stock.
Dasilva said as they try to consolidate the global cloud point-of-sale market, being a publicly traded stock helps.
“We see this fragmented market, and having a public currency changes the game, right?” Dasilva said.
“We typically do a split of shares and cash, so these founders are brought in and can help Lightspeed grow in a particular region or a particular vertical, and that’s been really helped by the fact that we’re a public company.”
Overall, 2019 has developed a reputation as being disastrous for tech IPOs. Uber Technologies Inc. went public at an underwhelming valuation, and the stock has sagged by 10 per cent in the months since. Slack Technologies Inc. is down 45 per cent since it did a direct listing in June. Then when The We Company, parent company to WeWork, filed to go public, the company finances and governance structures were so widely derided that the company was forced to withdraw its plan.
Lightspeed POS got out ahead of all that, and Dasilva said they were lucky that the U.S. government shutdown early in 2019 meant American companies had to hold off because the Securities and Exchange Commission wasn’t accepting new public listings.
“The great thing about that window of time is that we really got to spend quality of time and got the full attention of investors,” Dasilva said.
“Maybe that wouldn’t have been the case if we had to compete for attention with some of these larger names.”
Since it listed at $16 last March the shares have nearly tripled, and were trading north of $43 this week.
On Tuesday, Dasilva was in Toronto to open a new office — the company’s 14th — which will focus on the company’s payments division.
Many of its other offices are overseas, a result of a string of acquisitions that Dasilva indicated was likely to continue in 2020.
“We have a robust pipeline. We’re always looking at potential opportunities,” he said.
“It’s always going to be a balance between organic and acquisitions to accelerate. I think there’s always going to be a balance of those approaches.
Lightspeed will report third-quarter results on the morning of Feb. 6.