The Canadian Investor - Will the IPO Market Rebound in 2023?

Episode Date: July 10, 2023

We start this episode by looking at how Canada’s largest pension fund compare to other foreign pension funds. Braden explains why he recently sold one of his positions and we take a look at how the IPO market has faired over the last 5 years. Symbols of stocks discussed: SPGI, MCO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Interested in becoming the next co-host of the Canadian Investor Podcast? Send us a 1 minute video at [e-mail] . Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

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It's just a temporary, I'm not going to be around on the Thursday episodes. And just to remind everyone here, if you haven't heard that announcement, go listen to the beginning of last episode. But we are looking for applications still. We're not going to rush it. I'm going to find the right person. Send a one-minute video on why you'd be a great co-host with Simon on the news and earnings episodes to Canadian investor pod at gmail.com. And, uh, you just have to be as cool,

but probably not. Uh, you don't have to be as smart as Simon. Simon's the smartest guy I know. So we'll just leave it at that. And final little housekeeping item. If you haven't given the show a review, go ahead and do that. It takes all of 14 seconds to leave us a review, gives us a nice dopamine hit, and lets the show grow. Simon, my announcements are done. What are you going to talk about today for the first episode, for the first segment of the show today? Yeah, so for the first segment, I'm doing a little bit of a

kind of Canadian-ish place in the world. So a little bit more macro, but I think it's pretty interesting. People know that I work in the pension world, and I wanted to have a look at the largest sovereign wealth funds and pension funds in the world. And I got that from the data from global SWF.com slash rankings. And it's in USD. So US dollars. So, you know, don't add us if you say, oh, I know the total amount of assets of the Canadian pension plan investment board is actually more than that. It's because it's in USD and the Canadian pension funds are actually reporting in Canadian dollars. So they use their latest year end figures. And then when that wasn't available, they used estimates. So for the most part, I, you know, with the conversion, all that from what I could see, it was quite accurate. And before I get started with the list,

let's provide a bit of context here. And when I did the National Bank ETF report last episode, it showed that $339 billion in assets were invested across ETFs in Canada. It might sound like a lot, but keep in mind that some of the funds that we'll be talking about literally dwarf these amounts. So you're looking at the total value of ETFs in Canada. They don't even come close to some of these pension funds. That's how big they are. Any comments here before I get started on these lists? are. Any comments here before I get started on these lists? No, I'm just looking at the list. And so is that like total AUM on these? Total assets. I mean, they don't, I guess it would be assets under management. They qualify that as assets, but I believe it should be the same

figure depending on what term probably just people use yeah yeah some these some of these are absolutely egregious and and also the not like the global ones but also the canadian ones too like we got some we got some big pension funds yeah definitely we got some big ones in canada so i'll give the top 10 lists in the world. Unfortunately, there's no Canadian ones in there. Just to give some context on the shares. But we're not far off of number 10. Yeah, we're not far off, exactly.

And then I'll mention all the Canadian pension plans that actually fall in the top 100. And there's quite a few that fall in there. So the first one globally at $1.45 trillion is the Japanese Government Pension Investment Fund, GPIF. The second one, and this one we hear a lot about it, is the Norwegian Investment Fund at $1.38 trillion. The next one here is 1.35 trillion the china investment corporation again in china at just above 1 trillion the china statement administration of foreign exchange fund now just below 1 trillion is the abu dhabi investment authority from uae now number six on the list is at 769 billion Quite the draw from number five is the Kuwait Investment Authority. So a lot of a few Middle Eastern countries here that we're seeing.

Next on the list at $707 billion is the National Pension Service of South Korea. Number eight, the Public Investment Fund of Saudi Arabia at $700 billion. This one, I believe it probably doesn't come at much of a surprise because I think if I know this correctly, they're the ones that started Live, right? Or backed it. Yeah, I was going to say how many billions have gone to PGA Tour players and now... Sports in general, I guess. Sports in general.

Yeah. Number nine. So 690 billion. So the last five here are very close next to each other in terms of asset. So number nine is 690 billion is the Government of Singapore Investment Corporation. And then number 10 is the U.S. Federal Retirement Thrift Investment Board. This is for U.S. federal employees. I believe they're all on defined contribution pensions, but that's the amount in terms of investments that would be

or assets that would be from all of those employees. So again, these figures are all in USD, but just by the sheer size, I think it helps people understand how impactful these investment funds can be when they make decisions. I mean, you're talking like they, if they make an investment of, you know, like $50 million, like they probably won't make that investment because it just does not move the needle for them and if they do sometimes it's just a kind of a bet a high-risk bet if it works out it works out if it doesn't it doesn't it's not the end of the world and we saw the teachers fund with ftx right? I was in the news, and I'll talk about teachers. It's peanuts for teachers. I think it was 90 million. Yeah. Oh, yeah. And it's literally peanuts for

them. I know it doesn't look good, and they clearly should have done better due diligence, but I think it's just important for people to understand the sheer size of these funds. Another interesting shift, well, you just touched on it with FTX. An interesting shift over the last 10 years has been how much allocation has gone to venture capital. There's been these venture funds and their LPs are sometimes this 500 billion AUM pension fund, like state pension fund. And they've funneled a lot of it to some of these venture firms. And they've had so much money to deploy into startups and, you know, what are traditionally known as extremely risky assets. It's go to a billion or go to zero type of mentality. And that's been a really interesting development I've seen as well. Just looking on how the allocation of these funds has shifted,

the shift to more and more venture capital has been an interesting development. Now, that's also very good for innovation as well, is that, you know, these startups are getting funded from these huge multi hundred billion funds, but it's they're more speculative assets. There's no doubt. Yeah, yeah, exactly. And look, I think the other one that I've been very critical of is private equity. very critical of is private equity. Just because a lot we're seeing it in Canada with some of the large funds. And I'm talking about it with the episode with Dan on commercial real estate that will be coming out very soon. And one thing that I have issue with is it's very hard to value that private equity because, yes, they have methods to do so, but they're not mark to market.

So at the end of the day, and you've seen that, and the reason I talk with Dan in the episode is you've seen that discrepancy between REIT values that are in the exact same space as private equity. And private equity is like flat or slightly up where the REITs is down 40%, which makes absolutely no sense in my view and clearly shows that there could be some problem brewing, at least for the private equity part of some of those portfolio. I'm not saying they're zeros. I'm just saying they,

I think there's legitimate questions whether they're properly valued or not. That's why people love assets like venture and PE that are not out to market. It's like, I know I've lost money. Just don't tell me. Just don't value it every day. And I haven't lost my money.

It's the same reason why people treat the stock market like a casino, when you can get a new price every second while the market's open, whereas they would never think of their house like that. I mean, technically, technically, you'd have a slight change in the value of your home every day if you got it appraised. Like, you know, maybe not every day, but say someone came in. Think of how different the housing market would be if I knocked on your door and said, hey, it's time for an appraisal every single month, how people would treat that asset differently. Same way people don't mark the market on PE and VC. Just don't tell me I lost money. No, no. But it's funny how they like they they'll definitely

like put up those returns and say oh look at these returns but it's just yeah i take issue with how they value them um clearly they're not in like you know pension funds they're not traders so typically they'll buy assets to hold them for a while and that's fine but i just find there's a little bit of discrepancy when they look, you know, the truth is probably in the middle between what the public markets are saying and private equity, because like you said, public markets tend to be a bit more like a pendulum. And private equity, it's almost on the other end of the spectrum. But yeah, that's just a little rant on my end. No, you're right. But it's the same reason why public equities is actually such a good opportunity is because it's so irrational and Mr. Market is this bipolar analogy from the intelligent investor,

which, by the way, for those who have not read The Intelligent Investor, which, by the way, for those who have not read The Intelligent Investor, you actually, like, of course, it'll say, you know, it's the Bible of value investing. It's, you know, Warren Buffett's most recommended book. It is so boring, but the first 50 pages are invaluable because it talks about Mr. Market and this analogy of Mr. Market being a bipolar, changes his mind every day to the upside, to the downside, the volatility of public markets, going crazy on news, super optimistic to super pessimistic. Use that as your advantage. Use Mr. Market as your advantage, right? And so, yeah, it's a little more manic than these assets that are not valued every day. But if you can remain calm among the manic market like, stocks are amazing because they act like that. Because you can go against the grain. You can get amazing prices on stuff that should be theoretically 100% efficient. We all know that's not true.

No, exactly. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep

is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started.

But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. So now move on to the Canadian portion here. So at number 15 of the top 100 list globally

is the cpp canadian pension plan investment board at 422 billion number 21 that case the dept placement du quebec which is qpp they manage the assets for qpp but a few different institutions on the quebec side well. Number 31, the Public Service Investment Board. That's the pension plan for federal employees at $185 billion. Number 33 is Teachers. So the Ontario Teachers Plan at $182 billion. Number 40 is BC Investment. So they managed a capital of several pension plan and other public trusts in BC. Number 57 at 100. I think I switched these over or I must have made a typo error, but I think it's probably around 157 billion, which is AIMCO, Alberta Investment Management Corporation. It invests for more than 30 pensions, endowments,

and government funds. Number 68 at 92 billion, OMERS. So that's the Ontario Municipality Employee Retirement System. So typically if you're an Ontario municipal worker, you'll be part of OMERS. HOOP, H-O-O-P-P, which is the Health Care of Ontario Pension Plan at number 77. And then the last one on the top 100 list at $54 billion is IMCO, founded in 2016. It manages the capital of Ontario Pension Board and WSIB as well. and WSIB as well. So, you know, Canada may not have the, may not be part of the top 10, but nonetheless, we have some pretty large pension, pension funds. And that's why when you see in the news that one of these does an investment in whatever they, you know, makes the news, whatever it is, I think teachers at some point, you know, had a share of MLSC and like in the Maple Leafs or something like that.

So when you see them making the news, they have a lot of capital backing them, but they're definitely operated like an institution. So if you have a pension plan, for example, that would own a sports team, they typically won't be very emotional so they'll be very just to business uh because you know they're fund managers they're not you know this rich billionaire owner that wants it almost as a a toy or something like that so it's uh just something to keep in mind that these pension funds they you know when they make a move and it's in the news, that's why they have a lot of capital backing them. Did you know that the Harvard University Endowment by size would make this list? Really? Okay. That's how absurd the Harvard Universityowment uh valued at the end of 2021 at 53.2 billion of assets under management that's pretty that's pretty impressive yeah it's probably right it

might actually be on the list i don't have it in front of me because i just put the the ones that i wanted to i just looked but it looks like it's all symbols for them so okay nobody got time for that to look yeah they're probably right either at the very bottom of the list or just right out of it that is um crazy to think about you know these i'm amazed by these like tax-free hedge funds you know like what a business that I'm going to start a tax-free hedge fund under a university or like a church. Like, oh, what's the AUM on? I was just in Utah, so it was top of mind, like the Mormon Church. Yeah, the Mormon Church AUM. Let me see if I can find this. The Mormon Church has amassed a hundred billion. That's interesting.

As of 2020, the Wall Street Journal says the Mormon church amassed a hundred billion. It is the best kept secret in the investment world. I got to read this article. Oh, it's behind a paywall. Of course. Pay $2 and read this article for the Wall Street Journal. That is insane though, man. You can get Apple News Plus and just, I think you have it on there included. Interesting. Okay. So finances of the Church of Jesus Christ of Latter-day Saints, over $100 billion.

Yeah, it's a tax-free $100 billion hedge fund. That is the best business maybe ever. Yeah, because in this – Maybe ever. Is it the same in Canada where religious organization get preferred or like – Okay. Yeah. I knew it was something like that in the u.s i haven't really looked into

it all that much but okay no that's interesting our corporation to religion let's start a like a series i mean we have a bit of a you know cult following with the the listeners who've been listening for a long time we'd love a good cult you know let's like take this up a notch and like change our status as like you know a serious cult and then's take this up a notch and change our status as a serious cult. And then the ad revenue will be tax-free. What do you think? Yeah, I don't think the CRA would agree with that. Oh, come on.

Oh, come on. All right. Something, I like these types of topics. What I'm going to do next, which is I took it right from joinTCI.com. So you can go on join tci.com you can see like you know kind of a rationale for what we do and as well it's on video so you could see that simone just had to talk while i housed a bagel it's a morning recording i don't know if you saw that but i was just absolutely yeah i was housing a bagel during your uh your

pension i saw you i thought you were saying i did i'm like what are you talking about no while you're talking now that would be yeah that would be impressive so people on the video just saw me like like coffee one hand bagel or saw me going up and down with my desk yeah yeah exactly the standing desk, back problems guy. All right. So this is around my decision to, my decision with two portfolio companies that I own, Moody's and S&P Global. So ticker MCO and SPGI. So as many of the listeners know, I love holding equal weight duopolies. of the listeners know, I love holding equal weight duopolies. That's been kind of like part of my ethos, Simone, I would say, is these duopolies or oligopolies, and I just think of them as one position. So if I have 25 portfolio companies, or 22, I think was the number before

this, I really actually only look at my portfolio. I make a separate spreadsheet of how I view it, which is really only 13 or 14 investment ideas. For instance, Visa and MasterCard, I equal weight them at 5% each. That's a 10% position for me. I don't go, oh, I have Visa 5, MasterCard 5. That's just the way my brain works because these are the same businesses. Now, I've traditionally thought of S&P Global and Moody's in the same fashion because they have, for the best part of the market, there's also Fitch, but let's just say most of the market share is this duopoly of owning the credit rating agencies. So these are the premier players in the credit rating agency business. If you need a bond rated, which you do, these are the two names in town. So you have this like regulatory moat. You have this like, if you want to sell a bond to investors, and it's not rated by one of these two. It's like they're really not taken

seriously. And so they have this like wonderful position in the market. And this is still true. But the two businesses have grown dramatically outside of the core credit rating agency businesses over the last like 15 years, I would, primarily. And over the last 10 years in particular. And now there's been this kind of divergence in the two businesses in terms of what they do. They have like half the business is the credit rating agency. And then it's kind of like, what else? It's like the Canadian banks, right, Simone? It's like you have to value them as like, we all know they do banking, but what else do they do? What else are they investing in? Or like the telcos, right? Like,

how else, how are they investing that free cash flow? We all know they have an oligopoly on Canadian telco, kind of similar. So organically and through acquisitions, I feel that S&P has done a superior job to build the business X credit rating agency. So what I'll call X CRA, speaking of the CRA, X CRA, X credit rating agency. So looking at the business X CRA, S&P has built the market intelligent business, indices, like when we talk about the S&P 500, the index business is amazing. The optionality they've built among the other segments. And with M&A, they just acquired IHS market over the last 12 months. That was like a $40 billion merger.

So in aggregate, you have the market intelligence business, the ratings business, the commodity insights business, the mobility revenue business, engineering solutions, indices, and plats. They sell information largely, right? And XCRA, I find it very compelling because when you look at Moody's, it's basically Moody's Analytics is XCRA. And it's a phenomenal business, don't get me wrong. But even if you just compare it, Moody's Analytics versus S&P and market intelligence top line, you've seen them grow dramatically faster, largely through M&A. And I'm cool with that. I'm good with that. Now, don't get me wrong. Moody's is still a fantastic business. It has an extremely wide

moat. And the credit rating agency is amazing. And their risk management software offerings under Moody's Analytics is kind of like the name in town. So they have a pretty wide moat there. That being said, I am moving the entire weighting of Moody's into S&P. So now it is truly just one position. And it's not huge. It's like three and a half percent in total. So nothing crazy. Now, more important than everything I've just mentioned, I've given kind of my high level reasons why. Of course, there's more to think about,

but this is very high level. The important takeaway here is I have toyed around with this idea for close to two years now. And I don't jump into decisions for the sake of decision-making. I don't do trades for the sake of trades, especially with a portfolio company as good as Moody's. There's nothing wrong with the business. It's a fantastic business. Berkshire's owned it for how many decades now? The reason I get more comfortable making that decision is getting closer to the analytics business myself, understanding S&P's products better and better. And this is really important, right? Like I work in this industry. Like I know their position here. And so that's just kind of my overall decision. But the important takeaway here is I sat on this decision

and didn't make one for about two years as I've equal weighted them. And that's important to talk about because, you know, most people make decisions too fast and maybe this will be the wrong one and I'm going to be okay with that. Right. Like maybe it's not the right decision, but I've, I've sat on it and thought about it for a long time. No. And I think that's, you know, that's a good explanation. I mean, I went over it when I sold Teladoc, right? I was thinking about it. And I think it took my it took about a year, because I wanted to see where the business was going. And there were things that I still loved about the business,

but there were really some solid question marks. And I wanted to see, you know, in the following year as the environment kind of change, we went from, you know, full on restriction, lockdowns, pandemic to now, you know, not having these restrictions again and how it would impact their business, inflation and so on. And I came to the conclusion after that one year that, you know, in my opinion, I could use that money and, you know, invested in better investment than Teladoc. And I think that's a similar assessment that you did is that in your view, you know, S&P Global just makes more sense. Yeah, like you look at them X core credit rating agency business and I think's better. And I don't want to diversify. That's the biggest piece. Owning another position when I have higher conviction in another one is the Charlie Munger diversification. And it should be avoided at all costs, in my opinion.

Diversifying for the sake of diversifying is bad investment strategy. You know, that could be debated. That's just my opinion. But I think diversification should be avoided at all costs. Yeah, no, no, definitely. Anything else you wanted to add or should I move on to our last segment here? No, let's, yeah.

Speaking of SNP Global. I didn't even actually know you were doing this. So this is very related. This is good. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select

ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best

products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since airbnb.ca forward slash host. That is airbnb.ca forward slash host. Yeah, so in January, so basically, you know, just transitioned, which not very smooth at this point, but in January, S&P Global had a report on the 2022 IPO market compared to previous

years. And the data went back five years, which was really interesting. And we talked about IPOs before, you know, probably around a year ago. I think the market obviously was very different, as we'll see. And I'll give the high points here. And as most people probably know or have the suspicion that it was not a great year in 2022 for IPOs. So globally, there were a total of 1671 IPOs in 2022 compared to 3260 the year before. That's a decline of about 50%, just shy of that. The total proceeds from the IPOs went from $627 billion to $280 billion for a decline of 71%. And that I think is the most, I think, eye-popping metric. It's not necessarily the volume is one thing, but the proceeds, I think it just shows that there's less appetite for IPOs and capital available for that. And in terms of

numbers of IPOs, 2022 was 198 billion. So that's still, you know, that's actually a bit less than what we saw last year. In 2020 and 2018, there was a total of 1665 for proceeds of 211 billion. And 2020 was a bit of a weird year, as we all remember. So they had a total of 1863 IPOs, but the bulk of it came to Q3 and Q4 of 2020. And total proceeds in 2020 was 330 billion. So if people remember 2020, like the first half of the year, because of the pandemic, it was basically, I remember vividly, like you had IPOs like delaying, canceling, you know, changing their plans. And then the back half of 2020, like it was like a free for all, basically.

You remember that? Yep, I do. And then the U.S. So if you kind of the numbers I gave was definitely global. And I'll talk about Canada after the U.S. as well. So the U.S. saw a massive decline in IPOs. So in 2018, so I'll go year over year, but also the total proceeds. So the volume, then the total proceeds.

So I'll start with, I guess 2019 makes the most sense because I'm able to compare it to 2018. So 2019 saw 1% year over year growth in IPOs compared to 2018 at 214. And the proceeds was 62 billion compared to 45. And that's an increase of 37%. In 2020, saw total of 427 US IPOs. That was a double up basically from 2019. So you saw that increase and that back half of 2020 has strong back half and the proceeds went up 152% to 156 billion. 2021 was the outlier. We all remember that there was essentially, you know, growth stocks were crazy multiples didn't matter whether you made essentially, you know, growth stocks were crazy multiples, didn't matter whether you made money or lost money, like people were just pouring, it was risk

on and obviously IPOs benefited from that. So 908 IPOs in 2021, that was an increase of 113% over 2020, which was already a double up from 2019. And the proceeds were up 81% from 2020, which I already had seen a large increase. And the total proceeds were $283 billion. And now 2022, it's a massive reversal. So year over year compared to 2021, that was a decline of 84% in total IPOs at just 149. And the proceeds was 21 billion. And that was a decline of 93%. That's pretty, like I knew it was a bad year for IPOs, but especially looking at the proceeds, pretty crazy if you ask me. What are your thoughts on that? So it doubled. It grew up exactly 100% from 2019 to 2020. And then it grew more than 100% into 2021 in terms of number of IPOs.

Yeah. And the stat that's actually astounding to me is the 2020 number. Because the 2021 number, of course, you have this kind of hysteria, irrational exuberance, people running to go public. I get that. That happens pretty much every time the market acts that way. Maybe not to this extent, but that happens. But the fact that like the world just like shut down for the first half of that year, all of that volume was in like a quarter and a half. That's what's amazing about that number of 427 IPOs is that that happened basically like, okay, pause, pause, pause, basically like okay pause pause pause the world shut down too all right go you know like in the in basically q3 everyone took off everyone was having a chill relaxing uh you know year at home

but not investment bankers they were busy busy busy and and we saw that in the results like 2020 and 2021 like morgan Morgan Stanley had absurd years. Yeah, Goldman Sachs too. Goldman Sachs, yeah. Those big investment banks, they did quite well. And yeah, I think that's a really good point because 2021 was basically a continuation of the back half of 2020. Exactly, yeah. You have basically six quarters that things went completely crazy on the IPO front.

I don't think that's a strong statement. Almost really four quarters because the fourth Q of 21 wasn't too great. No. I think maybe people were still listing, but the market was seeing a clear correction by early November. seeing a clear correction by early November. Yeah, because I think, too, the markets were starting to anticipate central banks looking at raising rates, because if we remember, you know, inflation was starting to pick up at that point. I think, yeah, the context is definitely interesting. But if you look at the largest US IPOs in 2022, they're not the most... I'll just name a few names because I don't really know most of these.

The top three names at $1.8 billion of the gross amount offered, 1.7 billion and 1.1. So in order, SkyBridge Multi-Advisor Hedge Fund Portfolio, CoreBridge Financial, TPG Inc. So, I mean, I wasn't familiar with these businesses, are you? Like Access Income Fund, Screaming Eagle Acquisition Corp. It's basically like a… A lot of financials yeah yeah yeah it's a bunch of like financially financial engineering to go public essentially yeah and as we can see the amounts are quite small airbnbs you know blockbuster type thing right yeah yeah not uh

yeah no not really headliners and you know in know, in looking, according to EY report to the IPO trends in Q1 for 2023 was down even to 2022. So that's something just to take note. It's still I think it's starting to pick up a little bit just now. But again, I think depending what we see with interest rates and obviously I talked about Value Village that did, you think depending what we see with interest rates, and obviously I talked about Value Village that did a decent amount with its IPO. I don't remember on top of my head the actual proceeds, but they did a decent one. But I think it's going to be hit or miss, especially if you have the central banks talking about even potentially hiking more. That could even dampen further the IPO market this year. So we'll have

to see. It's hard to predict. And Canada as well saw a sharp decline in IPOs. So here's the data excluding SPAC. So there was a total of 42 IPOs, which was down 45% year over year. The bulk of them were mining IPOs. And there was a total of $1.3 billion in proceeds, which was down 85% year over year. And in Q1 2023, globally, there was a total of $299 IPO raising $21.5 billion. That was a decline of 8% on a volume basis and 61% on a proceeds basis. So still, you know, it's like I just mentioned, we're still having a pretty tame IPO market right now remains to be seen what we'll see in the back half of 2023. And this is just Q1 clearly. But I think the main reasons here that were reported in or mentioned this report for the sharp declines in 2022 and 2023 is probably to no surprise to anyone who's been listening or paying attention of what's going on in the markets.

But aggressive rate hikes from central banks, fears of global recessions, sharp declines in valuation from this tech space, which you alluded to in 2021 right into 2022. We saw that decline turmoil in the crypto and banking sector. So these are all some of the big factors that affected IPOs here. And SPAC activity so far this year is at its lowest since 2016. There were high liquidation rates. Good riddance. Yeah, I know. And as a whole, SPACs have performed poorly for investors.

And liquidation rates, for people not aware, is basically a SPAC goes public at a set price of $10. And then the, I think it's a sponsor of the SPAC. I don't exactly remember the exact term to use, but let's just say the sponsor has a specified time period i think usually it's two years to find an acquisition and essentially kind of you know that that company uses the SPAC and is listed publicly that is a time period i won't miss of SPAC mania yeah in what world was that a good idea uh well there Well, there's a few SPAC ETFs still, and they're not doing all that well. Not as bad as I would have thought, but still not that well. But it's really interesting just for the EY insights that I just went over.

It's just interesting to see what they're seeing right now. that I just went over. It's just interesting to see what they're seeing right now. And for people, you know, thinking there might be some unicorns coming to the public markets, we'll have to see. Have you heard anything about Stripe or still? I was just going to say,

it's been in limbo for so long now that I don't really know. I feel like they missed their opportunity. Well, they had a down yeah they had a down round i think at 56 billion uh valuation for up these are loose numbers but they i forget the exact numbers but it was roughly they raised at 100 billion valuation when the market was hot like like venture around. And then they raised again on a down round, maybe eight to 12 months ago at almost a little less than half

or a little more than half, I guess. Can you imagine if they raise at like summer of 2021, if they went public, how much money they could have gotten? Oh my God. It would have been crazy. Yeah. But it's important to remember here, like that's not always a good thing, right?

If you raise right at the peak, because- I think there's tax implications, right? And it really messes with employees too. Because if you go public, they get all this money, all their stock becomes public. They're getting a bunch of now public stock-based compensation. And it's not worth anywhere near what it was. It's not always a good thing to raise that money long-term.

Yeah, it's nice to raise the high valuation, but growing in, growing back into that valuation can be an uphill battle for these tech companies. Same in public, same in private markets. Like if I raise it, if I, if I go raise a round of stratosphere for stratosphere at 50 million, okay. And we need more financing and we have like a down round at 30 million or something. I screwed myself. Like you're basically dead. Having a down round before series like D is basically a death wish. So it's not, you know, there's more to this than it appears.

Yeah. No, that's fair. And you know that space better than I do for sure with Stratosphere. No, that's fair. And you know that space better than I do for sure with Stratosphere. But yeah, I was just thinking about Stripe. Couldn't help thinking that they left money on the table, but maybe it's not as simple as that. building companies these days is just putting it through a stripe, like big companies and small companies. And so they're kind of running away with it at this point. We'll see if some more competition comes in, but it's pretty tough to build out what they've built. There's no doubt. That being said, the knock on it as an investor is if competition does come, you just squeeze the hell out of that take rate. You squeeze that take rate from 30 cents a transaction plus 2.9% to,

oof, I don't know, basically a race to zero. And it becomes a much worse business. Yeah. And there's definitely companies that if they decide they could give them a run for their money i would probably take some time but there's definitely some companies that would have the resources to do that and if people want to fight it out they can i'll be over here owning the payment rails that they rely on yeah these are you know we could have 30 stripes but they're all running through Visa and MasterCard. All good for my portfolio. No issues there.

You have a Walmart and Costco say, oh, you guys have fun with that tech space. We'll just, you know, keep our capital extensive companies where no one can enter the markets. We're good with that. I would say tsm's highest on my watch list right now i just wish that it i just wish i acted when i should have you know you know when i really wanted to buy it was when uh buffett sold buffett buffett's 13f was yeah because i was like what is what is this why do you own it for a quarter uh i think they um from what i've read i think they just didn't fully understand the geopolitical

landscape i think they knew it in person when i was there that's that's the that's the gist of it yeah that's the gist of it but which is super complex but again do you have to like i've talked before you have you got 40 in apple there mr buffett like yeah and you have to look at probabilities too and you just assess like you know you do the best you can by trying to put different probabilities on various outcomes and obviously it's a non-zero chance that there could be an invasion. But whether that is high enough and the expected value is there or not, then that's for people to decide. That's how I think you need to view it. Because you can't think that it's a 0% chance that China invades Taiwan. It's clear it isn't. I don't know the probability, but it's also not 100%.

So, where it lies, I mean, that's where your assessment has to begin. Right. I just... It's not easy though. Yeah. I just worry that I have no real insight to even begin to estimate what those probabilities are. The point that I've been trying to make, and I sound like a broken record on the pod here, is if that happens, there's a lot, a lot of large caps that are affected.

Oh, yeah. It's all of them affected by that. So it doesn't make sense. It doesn't make sense to assign the geopolitical risk just because Taiwan's in the name of their company. You know what I mean? Just because Taiwan's in the name of Taiwan Semiconductor shouldn't hold more weight in risk when everyone's making chips there, when all the foundry capacity is there to begin with. No, no, I know what it's like it's like the peter lynch thing right like he always says invest in businesses that have the

most boring names ever like the most boring names ever if it's a sexy name if it's got a sexy ticker like uh ticker ai nah what. What is that? C3A. Has that bubble collapsed yet? C3AI stock. Has that collapsed yet? No, of course not. No, it'll triple from here too,

probably, I bet. Fucking what a joke. I don't even know what they do. I don't think their investors know what they do. That's the problem. I don't know what they do either. I've heard of the name, but that's the extent of it. Their quarter was atrocious. Their quarter was atrocious. Okay's the problem. I don't know what they do either. I've heard of the name, but that's-

Their quarter was atrocious. Their quarter was atrocious. Okay. Not surprised. I looked at it. It was terrible. It's just the hype. Yeah, exactly.

All right. Thanks for listening to the pod, folks. We really appreciate you. We're probably going to stop announcing the open position to co-host the thursday episodes with simone after today so one last announcement is that we are looking for some a player to come in and do the thursday news roundups a good a good person recognizes the show. They understand the culture. They understand the ethos. So we'd like it to be a listener, to be completely frank. We'd like it to be a listener because they understand the show and they understand the consistency that is required of making content here twice a week or once a week for the situation.

Yeah. And when you hear this, so you'll be hearing this episode on the 10th. So, you know, all of this week, send it over to us. We'll have our Gmail, Canadian investor pod, gmail.com in the show notes, send it over to us. I would say by the 16th, which is the Sunday. And then the following week, Brayden and I will start looking at them. And then we'll, you know, we appreciate everyone who sends a video in. We'll make a short list. We'll reach out to those that we want to explore further. And like Brayden said, it has to be the right fit. Probably the last thing I didn't mention is also someone that wants to keep learning. I

think that's really important. And it's it goes with the role, right? It has to almost have, well, I would say it has to be a passion where you're really interested in this stuff and doesn't even like feel like work when you're learning and researching. Yeah. That's right because we did it for a long time before it had any sort of economic value for us because we liked learning. If you just like – I'm scared to look but like if you look at like really old episodes, I don't know anything like, and I still don't like we're still learning constantly. That's, that's a good point, Simone. Like this is a never ending learning cycle. And that's what makes it fun and exciting is it's like forced learning, right? Like I like setting up things in my life where I have to do the action to the desired outcome that I wanna have.

And this is certainly one of those. So a one minute video on why you'd be a great co-host, why you'd mesh with our beloved Simone over here to canadianinvestorpod at gmail.com. That is canadianinvestorpod at gmail.com. That is CanadianInvestorPod at gmail.com. A little selfie video. Give us your personality, but also flex that you know what you're talking about. That's a good combo.

We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.