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Fidelity may make pre-IPO investment in HootSuite Media

Canadian social relationship platform HootSuite Media is expected soon to secure financing from U.S. mutual fund and financial services firm Fidelity Investments, reports the Wall Street Journal, citing “a person familiar with the matter.”

While the possibility “is still months away,” the source said an investment by Fidelity signals that an initial public offering (IPO) remains HootSuite’s “ultimate goal.”

HootSuite is reported to be negotiating a “crossover deal” with Fidelity. This type of transaction allows a financial institution that primarily invests in public companies to back a private enterprise ahead of an IPO to avoid the risk of missing out on the opportunity or obtaining a smaller-than-desired stake during the IPO process, the report said.

The amount of the expected financing by Fidelity was not disclosed. However, the source said that HootSuite has been valued in advance at US$725 million.

(Update: The Wall Street Journal has since reported new information indicating that Fidelity has in fact led a US$35 million investment in HootSuite.)

Based in Vancouver, HootSuite in August 2013 raised US$165 million in a Series B funding round led by Insight Venture Partners with participation from Accel Partners and existing investor OMERS Ventures. The deal ranks as the largest in the history of Canada’s venture capital market.

Since then, a number of reports have suggested that an IPO may be in the company’s future. Other Canadian venture-backed companies that have been the focus of similar IPO speculation include Desire2Learn, Shopify and Vision Critical Communications.

In fact, the Wall Street Journal noted that Desire2Learn’s recent $85 million funding may also be linked to IPO aspirations since the lead investor was an unidentified “large institutional asset manager.” Dislcosed backers included Columbus Nova Technology Partners, Graham Holdings, Four Rivers Group and Aurion Capital, as well as New Enterprise Associates and OMERS Ventures, which co-led the company’s prior round in 2012.

Based in Kitchener, Ontario, Desire2Learn is an enterprise e-learning software provider.

Since early 2013, nearly a dozen VC-backed Canadian technology companies have closed IPOs or entered public markets through other means. Recent examples include Ottawa cloud-based subscription software provider Kinaxis, which raised more than $100 million in an IPO and secondary offering in June, and Montréal specialized lighting manufacturer Lumenpulse, which raised a comparable amount in April. Both companies listed on the TSX.

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