Canadian technology company Lightspeed is testing its fortunes on the U.S. market, in hopes that investors will want a piece of its digital payments business.
Shares of Lightspeed POS Inc. began trading on the New York Stock Exchange on Friday, raising US$305 million for the company’s Montreal-based cloud technology business.
"There’s a lot of respect for Canadian tech and for Canadian companies to be technology leaders and category leaders," said chief executive Dax Dasilva.
"Many of our U.S. investors encouraged us, quarter upon quarter, to consider listing in New York."
The stock did not get off to a perfect start. Shares opened up at US$32, after underwriters priced them at US$30.50 in a public offering. But after hitting a high of US$32.44, the shares closed the day more than four per cent lower at US$30.25.
Dasilva said that it has been a tough week in the markets for technology companies, but said he is confident that there are "tailwinds" that will benefit the company’s mission to help small businesses to accept payments. The money raised by the public offering will help Lightspeed, add to its list of acquisitions, and develop new products, he said.
"A good half of our customers are in the U.S. … we wanted to raise our profile even more in the U.S., given that we have such an opportunity in front of us. The whole world is moving to digital commerce," said Dasilva.
Lightspeed, which already traded on the Toronto Stock Exchange, has been rewarded by Canadian investors this year.
Lightspeed's 2019 Canadian public offering was priced at C$16 per share. The shares have since more than doubled to trade for more than C$40 each in Toronto.
The company’s bet on U.S. investors comes as equity markets have tried for gains, despite pressures on the overall economy from the COVID-19 pandemic. The S&P 500 Information Technology index returned nearly 42 per cent for the one-year period ending Sept. 10, compared to a 12 per cent return in the S&P 500 overall.
The COVID-19 pandemic has pushed more small businesses toward digital payments, Lightspeed said in August, when it reported a 51-per cent year-over-year rise in sales compared to the same quarter in 2019.
Dasilva said the company has benefited from a customer base that tends to be more willing to experiment with new technology. Although Lightspeed has yet to turn a yearly profit, Dasilva estimated that retailers using Lightspeed’s platform are growing four to six times faster than a traditional retailer.
"We have a lot of exposure to retail and hospitality … initially, I think the market expected us to have a lot of exposure to COVID, given our customers. But our customers are also future-forward," said Dasilva.
CIBC Equity Research analyst Todd Coupland said Lightspeed’s August quarterly sales figures reflected a "strong" financial position. In a note to clients, Coupland said Lightspeed’s business has been buoyed by the company’s decision to offer its customers options for processing curbside pickups and mobile wallet payments, and integrations with U.S. tech giants like Google and Stripe.
In a prospectus offered to its U.S. investors, Lightspeed said it aspires to be a one-stop shop for expanding small businesses that need to ring up purchases, track inventory, schedule home deliveries and set up loyalty programs.
In one example, a Pennsylvania sporting goods company had to close its physical stores amid the COVID-19 lockdown, but was able to use Lightspeed’s technology to expand its online sales to 22 new states.
"I think we had more of a mapped-out path to profitability before COVID hit. Now, we are making sure that … the costs to acquire a customer is justified by the long-term value of the customer," said Dasilva. "What’s also well understood about companies that come fro Canada is that they are both innovative and grounded … we have DNA to be great international and global companies."
The 11.65-million share U.S. offering was led by underwriters Morgan Stanley, Barclays and BMO Capital Markets, with several banks, including RBC, CIBC, Scotiabank and Toronto-Dominion, acting as co-managers.
This report by The Canadian Press was first published Sept. 11, 2020.