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This daily Signal Boost is our attempt to give readers a morning head’s up on the news that will matter to Canadians interested in media, technology and telecom

Special agents working at Scotland Yard worried that cult religious groups inspired by TV series like Star Trek and The X-Files might commit widespread acts of violence ahead of the new millennium.

We've had BEAST, Lucky Thirteen, BREACH, BEAST, POODLE, Heartbleed and FREAK...now, it's LOGJAM. Paul Ducklin explains, and tells you what you can do about it.

TORONTO – For investment bankers, it may not get any better: despite seemingly high valuations there is an incredible demand for stocks, especially for those issuers new to the public markets.

That demand was on full display Thursday when Shopify Inc. priced its initial public offering: the Ottawa-based company agreed to sell 7.7 million subordinate voting shares at US$17 a share. At US$17, the shares were priced US$5 above the lower end of the marketing range set a few days back, and US$1 above the top end of the revised price range set on Wednesday.

Judging from investors’ behaviour the issue could have been priced higher: In trading Thursday the shares shot up to US$28.74, before falling to close at US25.68. For the day, more than 12.6 million shares were traded – meaning that the small public float was turned almost twice. By going public, the company, whose specialty is e-commerce, now has a valuation of more than twice what it was deemed to be worth less than one month back.

Against such a backdrop, bankers are hungrily searching far and wide for the next Shopify (or even an old-school legacy brand like Cara Operations, which went public earlier this year and which has seen a steady gain in its share price).

It’s a great time to be a Canadian technology company

Jim Kofman, vice-chair at Cormark Securities, said sector rotation is part of the reason why technology-related growth companies have re-emerged.

After bailing out of precious metals, then resources and after seeking safe havens in yield securities, “growth has come back in vogue,” said Kofman, whose firm is part of the syndicate taking Mogo Finance Technology Inc. public. Vancouver-based Mogo defines itself as “a leading online lending platform providing consumers with quick and efficient access to responsible credit solutions.”

In general Kofman said the companies now going public or thinking about going public are different from those that were around for a period of time during the tech bubble. “The [new] companies have matured, they have real businesses with strong growth stories, even if they [trade] at lofty multiples,” added Kofman.

“It’s a great time to be a Canadian technology company,” noted one banker, who is out pitching possible IPO transactions while admitting that Shopify is a special case because of its world-class technology and unique culture.

Richard Drew/AP PhotoShopify CEO Tobias Lutke, centre, wearing hat, is celebrated as he rings the New York Stock Exchange opening bell, marking the Canadian company's IPO, Thursday, May 21, 2015. The company's stock surged after the opening. Related

• Shopify goes gangbusters: Stock surges 51% in trading debut, valuing company at nearly US$2 billion
• How Canadian tech companies are preparing for the ‘public eye’ as Shopify Inc’s IPO looms

One possible candidate is Montreal-based Lightspeed POS, which has been around for a decade and which has received $65 million in external funding – though it financed itself until 2012.

Dax Dasilva, founder and chief executive of Lightspeed, which focuses on on-and offline retail, said that going public remains on the table: “[What happened with Shopify] is hugely encouraging for us and our team to see what kind of outcome all our hard work could bring.”

On Thursday, Dasilva was full of praise for what Shopify, which he described as “a compatriot” company, has achieved. He termed Shopify’s IPO “an incredible milestone for the company and the retail industry as a whole. This is another great example of the innovative technology leaders coming out of Canada.”

Other candidates often talked about are HootSuite, which manages social media platforms; and D2L, Desire2Learn,  whose focus is on “developing technology to improve the way the world learns.”

Indeed, at a conference in Vancouver Thursday, Hootsuite’s chief executive, Ryan Holmes, said, “I’m very bullish given the success that Shopify has had, and maybe we will want to speed that up a little bit,” he said.

Hewlett-Packard’s main businesses – selling servers, software and personal computers – have been weakened by the twin forces of cloud computing and mobile devices

LG has revealed a 55-inch OLED TV that’s so light and thin (1.45 kg and 0.508 millimetres thick) that it can be mounted on a wall with only magnets.

Dubbed “wallpaper TV,” the television can adhere to a wall by using a magnet attached to the television as well the surface it’s mounted on. While it’s only a proof-of-concept example, the potential of a magnetically-attachable television is exciting.

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• LG unveils G4 flagship smartphone — and it’s eerily similar to the G3
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LG has not announced plans regarding whether a consumer version of their wallpaper television will be released in the future.

The wallpaper TV was revealed as part of a larger announcement from LG concerning the company’s future and its emphasis on OLED technology. OLED screens created by television manufacturers such as Samsung LG and Sony are still expensive to produce since there is a low yield rate of manufactured displays that are actually functional. These additional costs are then handed on to consumers.

LG has revealed that the company has developed a way to mass-produce large-screen OLEDs at an 80 per cent success rate. The company also revealed that it expects to sell 600,000 OLED TV panels this year and approximately 1.5 million next year.

The tech CEO opens up about taking his Ottawa startup public and how it feels to be $100-million richer

This fall is the end of the beginning for Disney Interactive’s toys-to-life franchise, Disney Infinity.

The first game, released in 2013, introduced kids to the notion of purchasing plastic toy figures of iconic Disney characters from movies including The Incredibles, Monsters University, and Pirates of the Caribbean and then porting them into a game, Skylanders-style, where they went on  adventures inspired by the films. In Toy Box mode they got to mash up locations and characters from disparate films, creating the potential for some very unlikely scenarios – like Mr. Incredible and Jack Sparrow visiting Monsters University together.

It was a pretty big hit, selling more than three million copies in the first few months, plus countless more figures at about $14 each.

Last year’s Disney Infinity 2.0 expanded the series by introducing Disney-owned Marvel properties to the mix, with dozens of new collectible characters and three themed adventures drawing from The Avengers, Spider-Man, and Guardians of the Galaxy. All of the toys from the first game were compatible with the second, meaning Toy Box players could now make Mickey Mouse hang out with Iron Man in Andy’s room from Toy Story.

And now Disney Infinity 3.0, slated for release this fall, will add one last big Disney ingredient to the mix: Star Wars.

Disney InteractiveA scene from Star Wars: The Twilight of the Republic, the playset included with the Disney Infinity 3.0 starter pack.

“We envisioned Disney Infinity 3.0 as the final introduction of the Disney Infinity brand to consumers,” said John Vignocchi, vice president of production at Avalanche Software, the studio behind all the Disney Infinity games, at a Disney Infinity 3.0 showcase in Los Angeles on May 19th.

“When we laid out the roadmap a few years ago, our idea was that the first installment would be Disney Pixar, the second would be Marvel, and the third would bring LucasFilm in,” explained John Blackburn, Avalanche’s general manager. “We now have all three members of Disney’s family in the game,” he said, suggesting that future games in the series would likely build on these three movie pillars as new Disney films are released.

To keep with the series’ aggressive yearly release schedule (and launch in time for Star Wars: The Force Awakens, due this December) Avalanche took on several major partner studios – including Ninja Theory (Heavenly Sword), Sumo Digital (LittleBigPlanet 3), and Vancouver’s United Front Games (Sleeping Dogs). These new teams expanded and refined the franchise’s combat, play modes, and visual presentation, all aiming to capture an authentic Star Wars vibe.

“Video games are often the way kids experience Star Wars for the first time,” said Ada Duan, a vice president at LucasFilm who manages the studio’s games business and has been working closely with Avalanche.

Duan said LucasFilm conducts studies to learn more about how kids around the world interact with and are introduced to Star Wars, and games rank high when it comes to first impressions. With that in mind, she wanted to ensure Disney Infinity 3.0 captures the essence of the franchise’s characters, locations, and vehicles.

“Disney Infinity 3.0 is the perfect way for generations of fans to experience Star Wars as a family for the first time,” said Duan, though she notes that with games it’s not about hitting every beat of each movie. “It’s not that every moment needs to follow the film. We want players to have agency, to have fun with it.”

Disney IntractiveThe Disney Infinity 3.0 starter pack includes two characters: Anakin Skywalker and Ahsoka Tano.

Duan seems especially pleased with the way lightsaber combat turned out.

Avalanche brought in U.K.-based Ninja Theory, acclaimed for its work on the fast-paced, adult-oriented melee action game DmC: Devil May Cry, to build the campaign that comes with the starter pack – set during the events of the prequel trilogy and dubbed “Twilight of the Republic” – as well as completely revamp the series’ close quarters combat.

The result is that all playable Jedi have their own fighting styles and abilities. They can attack while hovering mid-jump, use Force push and pull skills, and animate very differently depending on the type of lightsaber(s) they use. To ensure players grow comfortable with this more sophisticated kind of combat, Twilight of the Republic focuses largely on lightsaber battles and Force mastery.

These elements will transfer forward to another playset (sold separately) called “Rise Against the Empire,” which is set during the original trilogy. Developed by Studio Gobo, this playset will introduce some radical new ideas for the franchise, including open-world spaceship battles that appear vaguely similar to LucasArts’ old Rogue Squadron games, with players attacking the Death Star in an X-Wing and taking down AT-ATs with snowspeeder tow cables.

A third Star Wars-themed playset – titled “The Force Awakens” and presumably based on the upcoming film – is in development as well, but Avalanche has yet to reveal any details beyond its name.

Non-Star Wars playsets will be available after launch as well, including a new Marvel playset (no details on this one, either), and another based on the upcoming Pixar film Inside Out about the goings-on inside an 11-year-old girl’s mind.

The latter looks like it may act as a kind of counter programming to all the Star Wars content, offering a colourful co-op-oriented adventure that’s light on fighting but heavy on new ideas, including some music-themed games and a pleasantly disconcerting 2D platformer mode that plays with our expectations of how gravity should work.

Chad SapiehaHan Solo, a collectible figure available for Disney Infinity 3.0.

But with Disney’s first Star Wars movie set to launch this fall, Disney Infinity 3.0‘s focus is plainly set on George Lucas’s galaxy far, far away – including a batch of new figures that will bring Disney Infinity’s running total of collectible characters to more than 100.

The Star Wars figures revealed so far include iconic faces from the first six movies, including those of Luke, Leia, Han, Chewbacca, Obi-Wan, Darth Vader, Darth Maul, and Yoda. As usual, some will come with playsets, others will be available separately. In keeping with the starter pack’s focus on the prequel trilogy, it ships with Anakin Skywalker and – from the Star Wars: The Clone Wars animated series – young female Jedi Ahsoka Tano.

“We have a lot of female players,” said Blackburn, explaining why it was important to ensure that one of the first two characters players possess is female. “Almost half of our players are female, and they’re active members of the community. And we’ve learned that girls are twice as likely to play female characters as they are male characters.”

New Power Discs – little plastic NFC fobs that add additional themes and content for the Toy Box – will be available, too, but unlike past games in which players needed to buy them in blind packs, hoping for the ones they wanted, Avalanche is making them available in clear, franchise-themed packs, so consumers will know exactly what they’re getting.

That means buyers looking for specific discs – like new ones that unlock complete Toy Box games made by professional developers (including a new nine-course, multi-cup kart racing game and a Diablo-style dungeon crawler, which both serve as good ways to see characters like Darth Vader, Sully, Spider-Man, and Tinker Bell starring side-by-side in the same game) – can get exactly what they want.

Chad SapiehaPrincess Leia, a collectible figure available for Disney Infinity 3.0.

The final and perhaps least expected difference between Disney Infinity 3.0 and its predecessors is simply that it clearly looks a lot better. Longer draw distances make for more cinematic environments, and more detail and clearer textures suggest that this third iteration taking advantage of current generation hardware in new ways.

Blackburn said that new artists at collaborating studios have a lot to do with the game’s new visual sophistication, but he also added that having a longer development cycle really helped.

“In all honesty, last year we didn’t have as much runway to start working on the Marvel edition as we did with LucasFilm and Star Wars,” said BlackBurn. “We approached LucasFilm much earlier. We’ve made a lot of technological advancements under the hood.

“We’ve just been able to really improve stuff.”

Businesses often don't realise why encryption is important, and how they can use it to protect their data. The latest in our Practical IT series tells you what encryption is and how you can use it in your business.

Ottawa-based tech firm receives warm welcome as it goes public

Shopify Inc. jumped in its trading debut, after the company raised a larger than expected US$131 million in its initial public offering.

Shopify rose 61 per cent to US$27.43 as of 9:59 a.m. in New York Trading, after the shares were sold for US$17 each. The stock is also listed in Toronto.

Shopify provides software that helps merchants sell their products online. The company was born out of a conundrum for 34-year-old founder Tobias Lutke, who had snowboards to sell over the Internet in 2004. He said in the prospectus that the software options for setting up small businesses online were complex and expensive, and started Shopify in 2006 as a result.

Today, 165,000 stores use Shopify.

Investors have been clamouring for the shares since Shopify began marketing the IPO: It initially offered the stock at US$12 to US$14, before boosting that to US$14 to US$16.

The US$17 IPO price indicates a market value of US$1.27 billion, based on 74.4 million shares outstanding.

The company doubled revenue to US$105 million last year, with almost two-thirds coming from merchants’ subscriptions. The rest is generated through services for the small businesses. Shopify posted a net loss of US$22.3 million in 2014.

Company Risks

Among the risks outlined in Shopify’s prospectus, the company cites payments. The company relies solely on Stripe Inc. to process the credit cards through merchants’ sites, and says any disruption could affect revenue. Payments are also subject to changing regulation in the various countries where Shopify operates, according to the prospectus.

Shopify is the first technology IPO to debut in Toronto since DataWind Inc.’s US$30.9 million deal June 30. Only 190 IPOs have ever listed in Toronto from the industry, compared with almost 2,000 in New York, according to data compiled by Bloomberg.

Bessemer Ventures, FirstMark Capital and OMERS Ventures are pre-IPO investors in Shopify, and none planned to sell shares. The company will have two classes of stock, with Class B representing 10 votes per share and Class A having one.

Morgan Stanley, Credit Suisse Group AG and Royal Bank of Canada managed the offering. The stock is listed on the New York Stock Exchange under the symbol SHOP and on the Toronto Stock Exchange under the symbol SH.

Bloomberg News

Hewlett-Packard Co. sold a majority stake in its Chinese server, storage and technology assets for US$2.3 billion to Tsinghua University, becoming the first major U.S. technology company to pass control to local owners since the government stepped up restrictions on foreign firms.

A group owned by the Chinese university, Tsinghua Holdings, will purchase the 51 per cent stake in a new business called H3C. The deal values the businesses at US$4.5 billion net of cash and debt, the companies said Thursday in a statement.

China has been encouraging the use of local suppliers and aims to purge most foreign technology from the country’s banks, military and government enterprises by 2020, people with knowledge of the matter said in December.

By selling control of the businesses to Chinese investors, Hewlett-Packard seeks to win sales to state-owned companies. The Palo Alto, California-based company will maintain full ownership of its China-based enterprise services, software, HP Helion Cloud, Aruba Networks, printing and personal-systems businesses.

Related

• Hewlett-Packard Co opens Canadian security operations centre
• How HP, eBay and Symantec will look when the companies’ splits take effect

Rough Quarter

Hewlett-Packard’s networking units had “a rougher than anticipated” quarter, Chief Executive Officer Meg Whitman told analysts in late February, noting that they struggled in China especially. Networking sales in the three months ended January 31 fell 11 per cent from a year earlier.

Under the deal, H3C will become a subsidiary of Unisplendour, a publicly traded unit of Tsinghua Holdings. Unisplendour, a software vendors and system integrator, has been in a long-term strategic distribution partnership with Hewlett-Packard since 1999.

The new H3C generated adjusted revenue of US$3.1 billion and adjusted operating profit of US$400 million last year, according to the companies’ statement.

Hewlett-Packard shares rose less than one per cent to US$33.15 in premarket trading Thursday.

Bloomberg News reported in March that Tsinghua, ICBC International Ltd.’s direct-investment arm RT Capital and state- owned China Huaxin Post & Telecommunication Economy Development Center were on a short list of bidders for the Hewlett-Packard units.

— With assistance from Tim Culpan in Taipei and Jonathan Browning in Hong Kong.

Bloomberg News

TORONTO — Kevin Crull — the former president of Bell Media, who quit after apologizing for trying to influence the editorial decisions of CTV journalists — has a new job at Sprint.

The U.S. telecommunications company says Crull will become its chief marketing officer at the end of May.

In that job, Crull will be responsible for Sprint’s advertising and marketing and all social media efforts.

Sprint’s president and CEO, Marcelo Claure, says in a statement that Crull’s experience at Bell Media will help the American telecom company provide unique content to its wireless customers.

Related

• Writing on the wall for Kevin Crull ouster at Bell Media following journalistic meddling
• Bell Media’s Kevin Crull stepping down as president effective immediately

Until his departure on April 9, Crull had been head of one of Canada’s biggest media operations, which includes the CTV television network, a variety of specialty television channels and a radio network.

He had been criticized publicly for attempting to limit the amount of air time that CTV News gave to the head of the Canadian Radio-television and Telecommunications Commission, which regulates Bell Media and its parent BCE Inc.

Ottawa’s latest tech star — a burgeoning software empire called Shopify — is set to begin issuing shares to the public.

The TSX and New York Stock Exchange Wednesday conditionally approved the listing of 7.7 million shares, which are being offered at US$17 — higher than expected. Trading could begin May 27.

It’s the clearest sign possible that you can build successful high-tech firms in the National Capital Region — and this means investors are once more giving Ottawa-Gatineau a second look.

Eight years ago, Shopify founder Tobias Lütke and his fellow entrepreneurs were generating a few thousand dollars a month selling snowboards over the Internet. Their headquarters was a small space above a Bridgehead coffee house on Elgin Street — a location that allowed the cash-strapped firm to pinch Wi-Fi signals.

Today, a good chunk of Shopify’s 630-plus employees operate out of a stunning new tower on the same street. The company last year recorded sales of US$105 million — none of it involving snowboards. Lütke and his founders determined the best way to make money was to license software that allows other entrepreneurs and retailers to build electronic storefronts.

Shopify hit a sweet spot. More than 160,000 merchants in 150 countries rely on its software, sold through monthly subscriptions. During Shopify’s most recent quarter, ended March 31, revenues were running at an annual rate of US$150 million.

Although the company is still gushing serious losses — about US$22.3 million last year — it is the growth potential that has investors excited.

With approval from the TSX and NYSE a virtual certainty, Shopify expects to raise US$130.9 million, which would be used to further expand the company’s operations and software offerings.

This would be the region’s largest initial public offering since 2010, when Mitel raked in US$147 million. It would also exceed the US$124 million initial public offering in 1998 by Entrust Technologies — which executed the region’s richest IPO during the tech boom.

At US$17 per share, Shopify will have a value of nearly US$1.3 billion — more than that of Mitel Networks, until now the region’s richest in terms of market capital.

Shopify’s IPO seems likely to serve as an important catalyst for new startups in the region. No fewer than five venture capital firms invested heavily in Lütke’s firm — and all will do very nicely.

Bessemer — for decades a Silicon Valley beacon for entrepreneurs — and FirstMark Capital of New York contributed the most to Shopify’s equity. They own 20.2 million and 7.9 million shares, respectively. It’s not known what they paid for their equity, but the average price paid by all of Shopify’s current shareholders was just $1.34 per share.

Bessemer, FirstMark and other venture firms will have no trouble with the idea of returning phone calls from other Ottawa startups.

The IPO will also make wealthy men of founders Lütke, Daniel Weinand and Cody Fauser. Hundreds of Shopify employees will benefit. Lütke owns nearly 10 million shares, while Weinand and Fauser hold more than 1.3 million each. This is potential seed capital for entrepreneurial colleagues.

Shopify’s early success is a good reminder that — despite the bursting of the late 1990s telecom bubble — the National Capital Region remains Canada’s most technology-intensive city. Last year, eight per cent of the region’s workforce was high-tech — by far the highest among Canada’s 35 largest cities. Kitchener-Waterloo and Toronto were next at 5.8 per cent and 5.4 per cent, respectively.

Our lead in the past few months has been slipping somewhat, which is why a catalyst from Shopify is timely. Overall, high-tech employment in Ottawa-Gatineau has dropped about 8,000 since hitting a recent peak last summer of 56,700. (This, according to Statistics Canada — based on a 12-month moving average, rather than the extremely volatile three-month average usually published by the agency.)

It’s not clear what’s driving the recent decline, but it may be temporary. Shopify’s IPO is just the latest in a string of IPOs since Mitel returned to the stock market five years ago. Halogen Software and Kinaxis raised $55 million and $100 million, respectively — and have been adding customers and employees at a fast clip. Tweed Inc. and other firms have started trading on the TSX Venture exchange.

What’s reassuring is the diversity. Halogen markets human resources software globally to more than 1,700 customers while Kinaxis — the latest version of a tech pioneer that has undergone several name changes (Carp Systems International and WebPlan among them) — makes software that helps companies track inventories electronically.

Kinaxis has done the best out of the IPO gate. Its share price has more than doubled over the past year as the firm has consistently delivered strong revenue growth and improved profits. The Kanata firm’s market value recently topped $700 million.

While Mitel’s shares are down about 35 per cent since its 2010 IPO, the company’s CEO, Rich McBee, has recently orchestrated a string of acquisitions en route to building a US$1.2 billion-a-year global concern. Its sales and earnings are recovering smartly.

There’s much that can go wrong following Shopify’s IPO. It’s just the nature of high tech. But if Lütke and his colleagues get the formula right, they could very well create a flagship firm capable of spinning off cash and entrepreneurs for years to come.

Certainly that’s how Lütke saw his role when he told the Citizen a little more than three years ago: “I want to build one of Canada’s greatest success stories,” he says. “That’s been my goal for a very long time.”

He’s still a long way from achieving it. But he’s getting closer by the day.

Ottawa Citizen

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This daily Signal Boost is our attempt to give readers a morning head’s up on the news that will matter to Canadians interested in media, technology and telecom

One of the backers of Maple Leafs Sports and Entertainment Ltd. was noticeably missing at Wednesday’s press conference that unveiled the new owners of the Canadian Football League’s Toronto Argonauts, BCE Inc. and MLSE chairman Larry Tanenbaum’s Kilmer Group: Rogers Communications Inc.

Bitter rivals BCE and Rogers put their feud aside when they teamed up in 2011 to buy a majority interest in MLSE. Along with Tanenbaum, the pair own the Toronto Maple Leafs, the Raptors, Toronto FC and the Marlies, among other media assets and real estate. Rogers also owns the Blue Jays and the Rogers Centre.

The duo has been adding to their libraries of coveted sports media rights, content that is best consumed live. Notably, in 2013, BCE bought the exclusive rights to CFL content on a variety of mediums through the 2018 football season. The telcos sell sports to their cable, Internet and smartphone subscribers — and then they sell the audiences these games amass to deep-pocketed advertisers.

Related

• Risk-premium for new Toronto Maple Leaf coach Mike Babcock
• Toronto Argos still need a new owner. Could Maple Leaf Sports and Entertainment be it?

The absence of Rogers from the Argos’ new, long-awaited ownership structure suggests that while sports may be the king of live content, not all sports and franchises are made equal.

“We already have the most-coveted sports assets and content in Canada,” Andrea Goldstein, spokeswoman at Rogers Media, said Wednesday in an email, adding the company is “glad” the Argos have found a new owner and a new home at BMO Field once their lease at the Rogers Centre expires after the 2017 season. “We’re focusing our energy on delivering great hockey coverage and the Blue Jays.”

Not only is Rogers busy juggling the other sports teams it either owns or co-owns, or finding space to show the slew of hockey games it’ll pay $5.2 billion to air over 12 years, but any investment it would have poured into the Argos would have knowingly fed the content pipes and laced the pockets of its foe Bell.

“For Rogers, a competitor, to buy the team, when broadcast is the main element of the league, just didn’t make sense,” said Bob Stellick of Toronto’s Stellick Marketing Communications. “The challenge is the Argos have lost a lot of money at the gate for a number of years. The synergy component might make some sense: If the Argos get better, TV ratings will improve the value and that’s only going to accrue to TSN.”

Financial Post
cpellegrini@nationalpost.com