Future for Canadian IPOs Is Bleak: 0 Announced in H1’22 and H2’22 Expected to Follow Similar Path

Canadian fintech companies saw $810million in total investment across 85 deals in the first half of 2022, down from $1.9billion in the second half of 2021. It was also a notable drop compared to the first half of 2021, which saw $5.4billion in investment across 108 deals. However, the first half of 2021 was an outlier, with one of the strongest quarters on record.

“The market downturn and ensuing lower tech valuations caused investors to hit the ‘pause button’ over the last few months, but with so much investment flowing into fintech last year, we see it as a re-balancing of expectations, or a sector reset if you will,” says Geoff Rush, national industry leader for financial services at KPMG in Canada. “We expect fintech to continue to draw interest in the second half of the year, but investors will be more selective about where they deploy capital.”

The majority of fintech investment in Canada in the first half of the year came from venture capital. Broken down by deal type, 25 were seed round investments, 23 were early-stage and 17 were later-stage funding rounds.

More than one-third of all fintech deals happened in the cryptoasset space, despite a downturn in that market.

H1’22 highlights:

• Investment in Canadian fintech totalled $426.6million in Q1 and $382.4million in Q2.
• 85 fintech deals in total (includes venture capital, mergers and acquisitions and private equity).
• 69 venture capital deals worth $776.12million.
• 29 deals in the cryptoasset space, eight deals in payments, eight in regtech, five in proptech.
• No initial public offerings in Canada.
• Global investment in fintech dropped from $111.2billion across 3,372 deals in H2’21 to $107.8billion across 2,980 deals in H1’22.
• The Americas saw fintech investment drop from $59.7billion to $39.4billion.

KPMG’s Global report also notes that the turmoil in the public markets “brought IPO activity almost to a halt,” and that includes Canada, where there were no IPOs in the first six months of the year. The dearth of IPOs is expected to continue into the second half of the year.

While overall investment in fintech is expected to be subdued in the next six months both globally and in Canada, continued downward pressure on tech valuations could result in more merger and acquisition and private equity activity, as investors and corporates look for bargains, the report notes.

“The innovation coming out of Canada’s fintech space and the digital enablement it provides to the financial services ecosystem makes Canada an attractive place for fintech investment, and I think we’ll continue to see growth in areas like payments, reg tech and crypto, despite the upheaval in the cryptoasset space and broader tech sector,” says Rajeev Shankar, partner finance transformation and financial services at KPMG in Canada.

“We’re also seeing investment in fintech companies based in places like Charlottetown, Medicine Hat and Quebec City, so that tells me that Canada’s fintech ecosystem will continue to evolve and diversify, both in terms of the types of fintechs that emerge, the services they offer, and even where they thrive,” he added.