Canada Fintechs Wealthsimple, Questrade to Offer Pre-IPO Access

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(Bloomberg) — Canadian online brokerages Wealthsimple and Questrade Inc. are joining a wave of companies promising to offer access to firms planning initial public offerings, as startup funding rounds heat up.

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Wealthsimple said Thursday it will allow ordinary investors to participate in US and domestic IPOs as soon as they’re launched, with rival Questrade following soon after.

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At Wealthsimple, clients will be able to request shares for certain upcoming IPOs, with no minimum order. The Toronto-based fintech will work with investment banks, which will allocate shares to the platform that can then be bought by clients. 

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A Wealthsimple spokesperson declined to name the banks or any of the IPOs it would offer access to. She also declined to say whether the highly anticipated SpaceX IPO, which is expected within the coming weeks, would be available.

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“We can only offer the deals we’re invited to participate in,” Wealthsimple says on its website without naming any of the companies. 

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The company also warns that clients may not get all, or any, of the shares requested if demand exceeds the shares Wealthsimple has available. As well, clients who sell or transfer their IPO shares in the first 90 days will be barred indefinitely from future IPO access — a policy that also exists at US brokerages. And US-only IPOs will only be available to accredited investors. Accredited investors meet certain criteria around assets or income.  

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Venture firms using special purpose vehicles as a way to invest in fast-growing businesses have grown in popularity with retail investors, inviting scrutiny recently. Anthropic PBC identified a number of secondary marketplaces as unauthorized sellers of its shares.

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Toronto-based Questrade is planning to launch a private markets platform this summer that will initially include pre-IPO opportunities and “institutional-grade private credit,” and later expand into other private assets, it said Thursday.  

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But the company is not planning to offer access to the SpaceX IPO, according to Chief Product Officer Hwan Kim, who said Questrade’s building a long-term platform, not looking to “capitalize on a single headline.” 

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The Elon Musk-controlled aerospace firm is generating “enormous interest, but that’s exactly when discipline matters most,” Kim said by email. “Secondary markets for high-profile pre-IPO names can attract a lot of noise, which can lead to unintended consequences when coinciding with lock-up periods.”

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Retail appetite for pre-IPO exposure has hit fever pitch in the US ahead of some high-profile IPOs, including SpaceX. Shares of vehicles such as Destiny Tech100 Inc., Robinhood Ventures Fund I and Fundrise Innovation Fund LLC have soared well above the underlying value of their investments.

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Questrade’s goal is to offer fair pricing and a focus on “mature, late-stage companies with clear paths toward potential liquidity,” Kim said. Client eligibility to invest will depend on the offering and comply with Canadian regulations.

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The company didn’t specify how it would secure access to the assets, but Kim said it will work with large, respected industry players, “sourcing high-quality private market investments and brokering the deals needed to bring them directly to our platform.”

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In Canada, investing in IPOs at the offer price is generally only available to institutional and wealthy investors. Vancouver-based The Hiive Company Ltd. offers online trading for shares of venture-backed companies.

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—With assistance from Stephanie Hughes.

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