LaBarge Weinstein Quarterly: Summer 2013

July 9, 2013

Although the summer weather was slow to arrive, we’re definitely in the swing of things now. And while it’s hot and humid outside, that’s not slowing things down here at LW.

Since mid-April, the team at LaBarge Weinstein assisted companies and investors in closing over $40M in financing transactions! We also finalized two M&A deals and acted for the underwriters in Halogen Software’s initial public offering.

As you might expect, our clients have also been hard at work and they are being recognized for their achievements. Here are a few client highlights from the past few months:

Stuart Bowness, CEO of MediaCore, won executive of the year at the VIATeC awards in Victoria in late June. Congratulations Stuart!

Each year, the Ottawa Business Journal releases their “Forty Under 40” list of individuals who exemplify leadership, entrepreneurship and community building. An honourable mention goes out to firm clients John Craig (Purple Forge), Tyler Eyamie (Fusebill), Mike Kelland (Tindr Solutions), Brian Pratt (Balkon), Luc Richard (Dual Code), Matthew Sachs (Urbandale Construction), Janice Siddons (TUC Managed IT Solutions), Christopher Smith (OPIN Software), and Daniel Weinand (Shopify) for making this year’s list.

On June 14^th, Accelerate Ottawa brought together past legends, established stars and promising rookies in the technology space. Michael Weider (Co-founder of Blaze Software), Jason Flick (Co-Founder & CEO of YOUi Labs Inc.), and Tobi Lütke (CEO & Founder of Shopify) were keynote speakers at this inaugural event.

Numbers Behind Yahoo’s $1.1 Billion Acquisition of Tumblr

Back on May 20^th, Yahoo announced that they planned to buy online blogging forum Tumblr for $1.1 billion. After a series of small acquisitions totaling less than $50 million, this deal is “a game changer,” according to Marissa Mayer, who left Google to become Yahoo’s CEO just 10 months ago. This transaction represents Yahoo’s largest takeover since the purchase of search engine company, Overture, back in 2003.

Here’s a breakdown of some figures surrounding this buyout:

$275 million = amount that David Karp, the founder of Tumblr received for his 25% stake in the company;

26 = David Karp’s age;

300 million = number of unique visitors Tumblr receives each month;

$6.2 million = average payout that Tumblr’s first 10 employees received;

13 = years Marissa Mayer spent at Google before becoming Yahoo’s CEO last summer;

$5.4 billion = amount of cash Yahoo had in its bank account prior to this acquisition;

175 = number of Tumblr employees;

75 million = number of daily posts added to Tumblr.

The deal officially closed on June 20^th.

Ottawa Women of Wonder

Each and every day, women throughout our country achieve some pretty fantastic accomplishments, on both a personal and professional level. Some of these successes are recognized, but the majority go unnoticed

That was, until one woman decided to change this by launching oWOW.

oWOW is a monthly column that profiles and celebrates local Women of Wonder in Ottawa. Founded by Jennifer MacKinnon, CEO of Fenix Solutions Inc., the website has been operating since 2011.

In May, our very own Debbie Weinstein was featured. Check out the article here.

Review of TSX Venture Exchange New Listings Activity in 2012

Each year the TSX Venture Exchange publishes a summary of its “new listings” activity. New listings include IPOs, qualifying transactions through the Capital Pool Company program, companies completing a reverse takeover and companies moving up from the NEX exchange or down from the TSX. Here are some random reflections after reviewing the data for 2012:

In 2012 there were a total of 236 “new listings” compared to 334 in 2011. We would not think the reduction in new listings activity comes as a shock to anyone that works in or follows public markets in Canada.

Of the new listings in 2012 there were 121 IPOs. 44 of those were traditional IPOs of operating companies (vs. 47 in 2011) and the other 77 were IPOs of Capital Pool Companies (vs. 112 in 2011). The rate of traditional IPOs is fairly steady year over year. The year over year drop in CPC formation would seem to line up with market sentiment over a good portion of 2012.

In 2012 there were 61 CPC qualifying transactions completed on the TSXV compared to 87 during 2011. It would be interesting to know whether there is a causal relationship between this statistic and the drop in CPC formation during 2012. For example, did the drop in qualifying transactions in 2012 lead to a drop in interest in forming a CPC or was it the other way around? It is not possible to say from reviewing the publicly available data but with CPC formation and qualifying transactions accounting for 60-65% of new listings activity on the TSXV over the last couple of years, any drop in CPC activity hurts the Exchange.

In 2012 there were half as many Reverse Takeovers on the TSXV as in 2011 (18 in 2012 vs. 36 in 2011). We would hazard a guess that this is closely tied to the general drop in investment activity that was felt by market participants in 2012. If doing an RTO will not open up new sources of funding for private enterprises it greatly reduces the incentive.

All in all, the 2012 TSX Venture Exchange new listing statistics do not reveal any surprises and seem to confirm what those of us who work with companies in the public markets felt in terms of market sentiment and availability of capital during much of 2012. Here’s hoping for a pick-up in 2013!

LW Connect

This past fall, we reintroduced our monthly networking sessions, LW Connect. With support from The Ottawa Network, these events run once a month on Thursdays from 5pm until 7pm at our Ottawa office, with a focus on seed level investing options for technology and knowledge-based startups. LW Connect will be on hiatus for July and August, but will be up and running again in September.

For more information, please contact Casey O’Brien at cobrien@lwlaw.com.

Deal Flow Report

Here is a sample of recent publicly-announced transactions that we’ve worked on over the past few months:

Firm and Staff News

We are pleased to announce that LaBarge Weinstein recently launched our new and improved website. LWLaw.com is now optimized to provide a great viewing experience whether on your desktops, tablets, or smartphones. Click here to take a tour of our new site.

Information Worth Sharing

In an important decision for tech companies in Canada, Bagtech successfully argued that it was a CCPC even though most of its voting shares were held by non-residents of Canada. Bagtech’s unanimous shareholder agreement made all the difference.

In a unanimous decision rendered June 21, 2013 (French only, so far), the Federal Court of Appeal upheld last year’s tax court decision in Canada v. Bioartificial Gel Technologies Inc. (Bagtech). The issue was whether Bagtech was entitled to the refundable tax credits it had claimed for its scientific research and experimental development (SR&ED) activities at a time when the majority of its voting shares were held by non-Canadian shareholders. Refundable SR&ED tax credits are only available to Canadian-controlled private corporations (CCPCs), and as the name implies, a CCPC cannot be “controlled” by non-Canadian and/or public shareholders. Read more here.