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Tech IPO hopes fall as Real Matters pushes back target date

Real Matters, led by veteran entrepreneur Jason Smith, has raised $200-million almost entirely from conservative Bay Street financial institutions

Fred Lum/The Globe and Mail

Canada's dry spell for technology initial public offerings is not likely to end until the new year. The Canadian company touted as the likeliest tech firm to break the sector's IPO drought – Real Matters Inc. – has now set its sights on an offering in 2017.

The board of the Markham, Ont.-based online mortgage services business recently green-lighted the company to start the process of going public on the Toronto Stock Exchange, sources familiar with the company told The Globe and Mail. Past adviser BMO Capital Markets has been tapped to serve as lead underwriter. BMO is one of the top tech underwriters in Canada; it co-led the 2014 IPO of Ottawa supply chain management software firm Kinaxis Inc. and is advising Vancouver-based marketing software firm Vision Critical, another top candidate to go public in the near- to medium-term. Another past Real Matters adviser, INFOR Financial Inc., is also likely to play a role in the transaction.

However, the work to update Real Matters' financials to public reporting standards is unlikely to be completed in time for the fall IPO window, meaning it will likely go some time in late winter or early spring of 2017 – subject to market conditions. The company declined an interview request.

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The market for tech IPOs in the United States – a lead indicator for Canadian issuers – appears to be thawing, after its quietest stretch since the credit crisis. Recent offerings by software provider Twilio and cloud-storage firm Nutanix opened to huge opening day surges, reminiscent of the eye-popping debuts that marked tech IPOs prior to the market freeze that set in a year ago. In Canada, there hasn't been a notable tech IPO since Ottawa-based Shopify Inc. went public in May, 2015, on the TSX and the New York Stock Exchange.

The 12-year-old Real Matters, led by veteran entrepreneur Jason Smith, has raised $200-million almost entirely from conservative Bay Street financial institutions – not Silicon Valley venture capital firms – and recently commanded a private market valuation of $650-million. The company has increased its top line at an average pace of 52 per cent over the past five years, through a mix of organic growth and acquisitions. Net revenue in its fiscal year ended Sept. 30 was $88-million, up 115 per cent over the previous year, according to sources familiar with the company, though some of that came from its $96-million (U.S.) acquisition of title search specialist Linear Title & Closing Ltd. Real Matters had been in talks for another acquisition, but The Globe has learned that deal is now off the table.

Real Matters, profitable since 2011, has staked much of its growth on the U.S. mortgage appraisal business. It assigns and manages appraisers through an online software platform that informs them how their performance statistics stack up against others. The company is picky, recruiting independent appraisers based on intensive screening, keeping regular tabs on them and paying above-average rates. As a result, the company boasts faster turnaround times and lower error rates than industry peers, which has helped it land most of the top North American mortgage providers as clients. By the end of 2016, Real Matters will be doing business with two of the largest U.S. mortgage underwriters, Wells Fargo and Quicken Loans.

The other leading Canadian tech IPO candidate is Pointclickcare, a Mississauga-based health-care software company. The company filed in summer 2015 to raise $100-million (U.S.) in a dual Nasdaq/TSX IPO, but has yet to proceed to market. According to securities filings, the company posted first-quarter revenue of $34.2-million(U.S.), up 28 per cent from the same period a year earlier. A spokeswoman said Pointclickcare was "in a quiet period" and couldn't share details on its IPO plans.

With a report from Niall McGee

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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