Future for Canadian IPOs bleak: 0 announced in H1’22 and H2’22 expected to follow similar path

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

“The market downturn and subsequent lower technology valuations caused investors to hit the ‘pause button’ in recent months, but with so much investment pouring into fintech last year, we see it as a rebalancing of expectations, or a sector reset if you will,” says Geoff Hurrynational industry leader for financial services at KPMG i Canada. “We expect fintech to continue to attract interest in the second half of the year, but investors will be more selective about where they spend capital.”

The majority of fintech investments 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 and 17 were later-stage financing rounds.

More than a third of all fintech deals occurred in the cryptoasset space, despite a slowdown in that market.

H1’22 highlights:

• Investments in Canadian fintech were total 426.6 million dollars in Q1 and 382.4 million dollars in Q2.
• 85 fintech deals in total (includes venture capital, M&A and private equity).
• 69 venture capital deals worth 776.12 million dollars.
• 29 deals in the crypto assets area, eight deals in payments, eight in regtech, five in proptech.
• No initial public offering i Canada.
• Global investments in fintech declined 111.2 billion dollars across 3,372 agreements in H2’21 to 107.8 billion dollars of 2,980 agreements in H1’22.
• America saw fintech investment fall off 59.7 billion dollars to 39.4 billion dollars.

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

While overall investment in fintech is expected to moderate over the next six months both globally and within Canadacontinued downward pressure on technology valuations could result in more M&A and private equity activity, as investors and companies look for bargains, the report notes.

“The innovation that comes out of Canada’s the fintech space and the digital opportunity it brings to the financial services ecosystem Canada an attractive location for fintech investment and I believe we will continue to see growth in areas such as payments, reg tech and crypto, despite the upheaval in the cryptoasset space and wider tech sector,” says Rajeev Shankarpartner finance transformation and financial services at KPMG i Canada.

“We also see investments in fintech companies based in places like Charlottetown, Medicine hat and Quebec Cityso that tells me that Canada’s The fintech ecosystem will continue to evolve and diversify, both in terms of the types of fintechs emerging, the services they offer, and even where they thrive,” he added.