Just over two years after going public on the Toronto Stock Exchange, Toronto-based investor relations software company Q4 Inc. is entering into a $257-million CAD buyout agreement with American private equity firm Sumeru Equity Partners that will take it private.
Q4 Inc. shareholders will receive cash payment of $6.05 per common share as part of the deal. While this marks a 36 percent premium compared to Q4 Inc’s closing price on November 10, it marks only half of the value of its October 2021 initial public offering (IPO) issue price of $12 a share.
Q4 Inc. is set to join a wave of other Canadian tech firms that went public during the pandemic and elected to go private once more.
“We are pleased to have reached this agreement with Sumeru Equity Partners, which delivers significant, immediate value to shareholders,” Q4 Inc. independent director Julie Silcock said in a statement. “The Board is unanimous in its belief that today’s transaction appropriately reflects the Company’s innovative and strong business while maximizing shareholder value.”
With the buyout, Q4 Inc. is set to join a wave of other Canadian tech companies that went public during the pandemic, have seen their stock prices fall and fail to recover amid the tech downturn, and elected to go private once more. This group includes Dialogue Health Technologies and BBTV Holdings.
For its part, Vancouver’s BBTV—which went public in October 2020—saw its revenue and stock price fall, losses grow, cut staff, and brought on a new CFO before entering into an agreement to go private under similar conditions to Q4 Inc.
Earlier this month, Toronto-based digital pharmacy startup Mednow was placed into receivership to restructure and identify parties interested in purchasing the company or its assets just two years after the company raised $37 million CAD in an IPO on the TSX Venture Exchange. A few days prior to the bankruptcy announcement, Mednow announced it had received a notice of default from its secured creditor Alirey Corp. amounting to $3.23 million.
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Meanwhile, in May, Calgary-based mCloud, which offers cloud services for asset management, was in talks to go private as it faced Nasdaq delisting due to its declining stock price. mCloud, which debuted on the Nasdaq at $4.50 a share in November 2021, was delisted in September after periodically trading under $1 since November 2022.
Q4 Inc. first announced that it was going public in 2021, reduced its IPO target from a $14-per-share floor to $12 after investor demand was weaker than expected. In April 2022, Q4 Inc. replaced its CFO following growing net losses and a falling stock price, then cut eight percent of its staff in August 2022 to accelerate its path to profitability.
In November 2022, Q4 Inc. founder and CEO Darrell Heaps expressed confidence that the company would reach profitability in 2023 despite challenging market conditions and slow growth.
“Revenue growth from the past two quarters was primarily impacted by macro headwinds, with IPO markets dropping to record lows, limiting our ability to add new customers at the rate we previously had,” Heaps told BetaKit at the time.
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Now, entering into an agreement to go private, Heaps is using similar language.
“The macro is something we don’t control,” Heaps said in an interview with The Globe and Mail. “What we can control is our own execution in how we drive and create value for customers, so I’m happy this (agreement) helps us do more of that.”
Heaps told The Globe that he could see Q4 Inc. return to the capital markets “down the road.”
Feature image courtesy Q4 Inc.