Shopify-like IPO successes recoming rare in Canada, Nowlan says

Canada will struggle to find another stock-market success story like Shopify Inc. as the country grapples with a public-listing drought and a delisting trend, according to Daniel Nowlan at National Bank Capital Markets.

The Canadian market has been seeing a “hollowing out” of smaller companies seeking to grow into larger and more globally meaningful firms, according to Nowlan, the firm’s vice chairman and managing director of equity capital markets, corporate and investment banking.

He highlighted Shopify, which began trading on both the New York Stock Exchange and Toronto Stock Exchange in 2015 after a larger-than-expected initial public offering. The e-commerce software company grew into one of Canada’s largest firms by market capitalization, and is now worth roughly $300 billion, second only to Royal Bank of Canada, data compiled by Bloomberg show.

“It’s tough to imagine that happening today, starting with the size they did in growing to what they’ve become,” Nowlan said on a panel at the Toronto Global Forum on Thursday.

He contrasted Canada’s capital-market environment with the U.S., where he says smaller companies that hold onto their listings can surge to valuations in the hundreds of billions of dollars.

Most firms going private in Canada from 2020 to 2025 have cited issues like undervalued shares, low trading volume, excessive disclosure requirements and challenges getting access to capital, according to a Thursday presentation from the Institute for Governance of Private and Public Organizations.

Nowlan put Dollarama Inc., which has a market value of about $56 billion, in the same camp as Shopify. He said it was “hard to imagine” the discount retailer listing today and becoming a global large-cap company in its business.

Canada needs to do better in terms of encouraging people to invest and take risks, he said. He added he’s been hopeful about efforts to attract capital and is counting on officials to take more steps to push for Canadian investment. Nowlan took a break from his banking career at one point to work in government, including as chief of staff to former Conservative Party Finance Minister Joe Oliver.

The Toronto Stock Exchange has been dealing with an IPO drought in recent years, and companies have also opted to leave it altogether. Since 2020, 351 companies have exited — with 41 delistings taking place this year, according to data from exchange operator TMX Group.

Meanwhile, eight firms listed on the Toronto Stock Exchange this year via IPOs as of Sept. 30, and 19 moved there from the TSX Venture Exchange.

Roughly two-thirds of the delistings since 2020 occurred because of mergers, TMX Group data show. Robert Peterman, chief commercial officer at the Toronto Stock Exchange, said by phone that there’s been more market consolidation and companies acquiring other publicly listed entities to grow.

GFL Environmental Inc. is one of the more recent examples of a Canadian success story mulling a take-private deal as it conducts a strategic review. Montreal-based Lightspeed Commerce Inc. considered going private in the past before opting to stay public on the TSX.