LifeSpeak Inc. LSPK-T continued a dismal run by Canadian technology companies that flocked to public markets last year as its stock crashed 74 per cent Thursday after a disappointing earnings report.
LifeSpeak, which raised $125-million when it went public at $10 a share on the Toronto Stock Exchange last July, closed the day at 75 cents – down 92.5 per cent since issue – after reporting first-quarter revenue of $8.7-million. That was well below consensus analyst expectations of $10.9-million as the company reported it had a contract-renewal issue with its largest client.
LifeSpeak, which provides online mental-health content for employees of its corporate customers, posted adjusted operating earnings that came in at $400,000, also well below analyst expectations of $2.5-million.
LifeSpeak also said that it expects to be “at or near” the low end of its prior guidance, after previously forecasting that it would generate $75-million to $85-million in annual recurring revenue, expand revenue by 180 per cent to 200 per cent and post adjusted operating earning margins of 30 per cent to 40 per cent.
In a period of mounting economic concerns stemming from runaway inflation, global supply-chain challenges, rising interest rates and war in Europe, investors have been particularly unforgiving of companies that have fallen short of expectations. Even companies that have met or exceeded forecasts have seen their shares sag.
LifeSpeak’s quarterly performance “significantly increases the risks” for the acquisitive company, Canaccord Genuity analyst Doug Taylor said in a note. Scotiabank analyst Adam Buckham said in a note that the results “were certainly more than disappointing, there’s no disguising that.”
Mr. Buckham added while the contract negotiations “may be a forgotten issue” by later this year “at least for now it’s certainly given bears some credence.” However, Mr. Buckham called the extent of the selloff “an irrational response.”
He noted that the company expects to generate $57-million in revenue this year, 24-per-cent operating profit margins, and that it has 870 customers. Nonetheless, he slashed his stock price target to $7 per share from $13.
It’s the latest blow for Canada’s huge crop of 2021 technology IPOs. Of the 16 tech companies that went public on the TSX last year, eight are trading for less than half their issue price, and only one – Magnet Forensics Inc., which went public last May – has never traded below its issue price, which was $17 a share.
However, even Magnet is getting closer to that level amid a continued broad-based selloff of technology stocks. It closed at $17.73 Thursday, down 73 per cent from its high last August.
The bleak stock-market performance in Canada mirrors that of many U.S. tech companies that went public last year, including Robinhood Markets, Inc. and Coinbase Global, Inc. The steep drop has led to speculation that flush private-equity firms could start privatizing undervalued publicly traded companies in the coming months if share prices remain depressed.
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Sean Silcoff