New Companies For A New Year
Canadians may welcome a new year with a new diet or a just-released book or movie, but for investors, buying into a new company is generally a bad idea.
Of course, those who’d been clever enough to buy even a single share of the world’s largest companies at the time of their initial public offerings (IPOs) would have no regrets. One share of Microsoft, for example, that could have been bought for US$21 when the company launched in March 1986, is worth US$141,697 today, figures from Nasdaq show. A single share of Apple, which went public at US$22 in December 1980, is now worth US$62,353, Amazon’s issue in May 1997 at US$18 is now worth US$55,963, and Nvidia, launched at US$12 in January 1999, is worth US$84,725.
These giant success stories aside, academic studies and investment gurus have long warned that IPOs are more of a gamble than an investment and should not be touched until well after the initial enthusiasm has died down. They argue that new companies have no track record, that future revenue or earnings can only be guessed at, and that there is so much hype surrounding the new listing that overpaying is almost a certainty.
In many cases, retail investors overlook the part of the prospectus where a newly listed company discloses its “material weaknesses,” which often include the admission that the company doesn’t yet have enough qualified people to turn out reliable financial statements.
A 2024 study by KPMG found that of the 569 companies that closed IPOs between 2021 and 2023, 46% disclosed a material weakness, most commonly because they didn’t have enough trained accountants on staff. The lack of accounting resources and expertise accounted for a full 68% of the reasons behind the weaknesses, the report says.1
Stock exchanges have tried to reduce suspicion around IPOs by demanding clearer and detailed prospectuses, longer lock-up periods and controls on insider selling. Underwriters behind each new issue must provide a prospectus about the new company and face legal liability if anything in the prospectus is wrong or left out. Promoters can also face liability. Even so, there is a huge incentive to portray the newly listed company favourably to create investor demand.
In an IPO, a private company raises capital by offering its shares to the stock market. IPOs, issuances of bonds or follow-on equity are all forms of new issues. In the last few years, many IPOs have come in the form of a Special Purpose Acquisition Company (SPAC), a shell corporation that raises capital through a public offering to acquire or merge with a private company. In Canada, SPACs and Capital Pool Companies (CPCs) both serve as shell vehicles to raise capital via IPOs and eventually acquire private operating companies, but CPCs generally involve smaller issues than SPACs.2
The launch of a new Exchange-Traded Fund (ETF) also technically counts as a new issue, but since they’re made up of a portfolio of existing publicly traded companies, a “new” ETF is more like a reshuffled deck of cards than a new company. Similarly, new Canadian Depositary Receipts (CDRs) that represent Canadian-dollar versions of foreign companies also come under the new issue umbrella.
Between 2022 and 2024, the number of new listings on the Toronto Stock Exchange fell dramatically. In 2024, almost all IPOs on the TSX came in the form of SPACs or CPCs, and only Groupe Dynamite Inc. was a traditional issue. The pattern continued in 2025 with most Canadian IPOs coming in the form of SPACs or new ETFs. The only true corporate listing was GO Residential Real Estate Investment Trust (GO.U/TSX), which focuses primarily on New York luxury apartments, and raised about US$410 million in July at US$15 per unit. The company has since shown solid performance, including high occupancy rates (at US$6,818 per suite) and its revenue, earnings and adjusted funds from operations (AFFO) all exceeded expectations. The units, however, are still well below their issue price.
The new listings market was completely different in the United States in 2025, as the number of new issues crossed 300 by November, made up of 193 single corporate issues and 122 SPACs. The year’s tally was 54% more than the 2024 total and more than double the amount seen in 2022 and 2023, and the largest since the post-pandemic spike of 1,035 IPOs in 2021. Most U.S. IPOs came in the technology sector and focused on companies in the Artificial Intelligence (AI), cybersecurity, cloud computing, and digital payments niches.
Investors who buy into IPOs usually regret it, but occasionally they profit if potential acquirers were unable to buy the target company before its shares started trading. For example, New York-based Metsera Inc., which develops obesity drugs, went public in a US$275 million offering at US$18 on 31 January 2025, and the new stock promptly soared. Investors who paid more still profited, however, after Pfizer Inc. and Novo Nordisk got into a bidding war over the newly listed company. Pfizer eventually won out and paid US$10 billion or US$65.60 a share in cash plus a contingent value right (CVR) that allows investors further potential gains if certain of Metsera’s drugs are approved.
Given that investors are better off waiting a year before buying, some companies that went public in 2024 may have settled into reasonable valuations. Analyst coverage is sparse, however.
Groupe Dynamite Inc. (GRGD/TSX)
This Montreal-based women’s clothing designer and retailer was founded as Garage in 1975 and has since grown to have 6,500 employees and more than 300 stores operating under its Garage and Dynamite banners.
The company’s shares performed poorly after its November 2024 IPO, sliding to a low near $13 in April 2025 before rebounding over the rest of 2025 to a high of about $75 in late November.
In a 10 September 2025 report, the company posted excellent results for its fiscal second quarter that ended 2 August, and offered strong guidance for the rest of 2025. Groupe Dynamite generated revenue of $326.4 million, up 36.5% from the $239.1 million reported in the same quarter in 2024. Operating income was $97.3 million, up 61.4% from the $60.3 million reported in the same quarter of 2024. Adjusted net diluted earnings climbed to 57 cents per share in the quarter, up from 40 cents a share in 2Q 2024.
Canadian analysts are optimistic about Groupe Dynamite, with 11 of 12 analysts seeing it as a buy3. Simply Wall Street has similarly optimistic forecasts4. In its 20 November 2025 quantitative stock report that measures a stock’s valuation, quality, growth, street sentiment and price momentum, CFRA listed Groupe Dynamite as the only strong buy among 11 clothing retailers, with a ranking in the seventh percentile of all stocks in its model universe (with one being the best and 100 the worst). The ranking came as a result of growth and stability in earnings and cash flow, the report says.
Nano Nuclear Energy (NNE/NASDAQ)
Nano makes small nuclear reactors, some stationary and some portable. The company also fabricates nuclear fuel and provides nuclear industry consulting services, while its publicly traded subsidiary, Nano Nuclear Space Inc. (NNS), is exploring the commercial possibilities of having such portable reactors in space, starting with reactors on the surface of the moon.
Nano is one of the few U.S. companies listed in 2024 that have garnered any degree of enthusiasm from analysts, since, like many new companies, it doesn’t even have any revenue yet. The company has a market capitalization of about US$1.6 billion.5
Renaissance U.S. IPO ETF (IPO/NYSE Arca)
Renaissance has two Exchange-Traded Funds (ETFs) that focus on newly listed companies. Launched in 2014, IPO has about $148 million in assets invested in 31 newly listed companies, with no one company representing more than 10% of the fund. The portfolio is rebalanced every quarter to replace the names that have been public for more than three years with newer ones, with no one company representing more than 10% of the fund. Fully 43% of the fund’s portfolio is made up of new technology listings, with 18% in consumer products, financials and health care. The fund carries a management expense ratio of 0.6%. Renaissance’s tiny international IPO ETF (IPOS/NYSE) has about $5 million invested in 36 names.6
Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. richarddmorrison@yahoo.ca
1 https://kpmg.com/kpmg-us/content/dam/kpmg/pdf/2025/ipo-material-weakness-study.pdf
2 https://www.tsx.com/ebooks/en/2025-guide-to-listing/
3 https://ca.investing.com/equities/groupe-dynamite-consensus-estimates
4 https://simplywall.st/stocks/ca/retail/tsx-grgd/groupe-dynamite-shares/future
5 https://simplywall.st/stocks/us/capital-goods/nasdaq-nne/nano-nuclear-energy
6 https://etfs.renaissancecapital.com