Hootsuite exploring a $200-million IPO on the TSX, source says

Hootsuite Inc., one of the first companies to spark Canada’s technology renaissance in the wake of the 2008-09 credit crisis, is exploring a potential $200-million initial public offering on the Toronto Stock Exchange in the coming months, according to a source.

The Vancouver company, a pioneer in the social-media-management software business, has engaged investment banks TD Securities and JP Morgan as advisers, and has been meeting this month with prospective public markets investors to gauge their interest in a process known as “testing the waters,” a source familiar with matter said. The Globe and Mail is not disclosing the identity of the source as they are not authorized to discuss the matter publicly.

Hootsuite spokeswoman Melanie Gaboriault said the company “as a matter of course does not comment on rumours and speculation.” The move comes 15 months after Tom Keiser, former Zendesk Inc. chief operating officer, took over as chief executive from founder Ryan Holmes and is leading efforts to revitalize the 1,000-person company.

Hootsuite was born in 2008 as a spinout from Invoke Media, Mr. Holmes’s internet service and marketing consultancy. The company and others provided a solution to a new problem. Hootsuite developed tools to enable companies, government agencies and non-profit agencies to get a handle on navigating the shift in public communications and manage their online activity across new social-media channels, including Facebook and Twitter.

By late 2011, Hootsuite was generating $1-million in monthly revenue and drew financing from U.S. and Canadian venture capitalists. The company grew rapidly and built a cult of personality around Mr. Holmes as a digital-economy thought leader.

But as Hootsuite reached US$200-million in annual revenue and operating profitability, it stagnated. The company missed quarterly sales targets and the product didn’t evolve in step with customer demands. Industry dynamics shifted as Twitter began to extract payments from Hootsuite and its peers.

The company stopped a sale process in late 2018 after potential bidders valued Hootsuite at less than US$750-million, below the company’s expectations.

Months of tense board discussions ensued in 2019 over whether Mr. Holmes was still the right person to lead the company after prospective buyers raised concerns about performance metrics and high customer and employee churn. The company laid off 10 per cent of staff in April, 2019, and overhauled its leadership team after Mr. Holmes agreed to step down later that year. He remains chairman.

Meanwhile, rivals Sprinklr Inc. and Sprout Social Inc. have since gone public, sporting valuations in the billions of dollars. A slew of Vancouver startups have hit “unicorn” valuations of US$1-billion in the past year, long after Hootsuite was expected to do so.

Under Mr. Keiser, however, Hootsuite has regained its mojo. He has pulled back on the company’s efforts to woo large corporations to focus instead on smaller-sized enterprises, where it is strongest.

He’s aiming to attain results more like those of leading subscription software vendors by trimming expenses and improving the company’s efforts to convert new or trial customers to longstanding paying clients. Mr. Keiser has beefed up the management team with new recruits and made two acquisitions this year.

So far, the results are promising. Hootsuite, which posted single-digit growth in the pandemic-addled 2020, booked 20-per-cent revenue growth in the second quarter, six months ahead of target for achieving that pace.

But the source said the growth has come at the expense of the company’s operating profitability, which has dipped into negative territory as the company increased revenues.

News of Hootsuite’s IPO plans were also reported Wednesday by BetaKit.

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