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Wednesday, February 1, 2023

Pineapple Financial Begins U.S. IPO Rollout (Pending:PAPL)

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A Quick Take On Pineapple Financial

Pineapple Financial (PAPL) has filed to raise $21.1 million in an IPO of its common stock, according to an S-1 registration statement.

The firm provides mortgage technologies to Canadian mortgage industry participants.

PAPL has grown revenue from a small base, but operating losses are also growing and the real estate market faces risks in a rising interest rate and slowing economic environment.

I’ll provide an update when we learn more IPO details from management.

Pineapple Overview

North York, Canada-based Pineapple was founded to develop data-driven technology offerings for licensed mortgage industry agents, brokers and consumers.

Management is headed by Chief Executive Officer Shubha Dasgupta, who has been with the firm since October 2015 and was previously a Mortgage Broker at Bedrock Financial Group.

The company’s primary offerings include its MyPineapple data management, CRM, underwriting support and reporting software to:

  • Mortgage agents

  • Mortgage brokers

  • Sub-brokers

  • Brokerage firms

  • Consumers

As of August 31, 2022, Pineapple has booked fair market value investment of $7.8 million from investors including Prodigy Capital Corp and individuals.

Pineapple – Customer Acquisition & Market

The firm generates revenue through subscription services to agents, assessment services and lender partner service commissions for completed applications.

95% of its revenue comes from lender partner service commissions and the company is active in mostly central and eastern provinces in Canada.

Management plans to open its first brokerage offices in British Columbia and Quebec ‘sometime in late 2022 or early 2023.’

Selling, G&A expenses as a percentage of total revenue have risen sharply as revenues have increased, as the figures below indicate:

Selling, G&A

Expenses vs. Revenue



FYE August 31, 2022


FYE August 31, 2021


(Source – SEC)

The Selling, G&A efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A spend, was 0.2x in the most recent reporting period. (Source – SEC)

According to a 2022 market research report by Mortgage Professional America Magazine, the Canadian market has recently been in a state of transition due to rising interest rates in response to high inflation.

Hot markets such as Toronto and Vancouver have seen skyrocketing housing prices.

The report said that ‘the prime lending rate remains reasonable by historical standards even after recent hikes.’

Rental markets in larger cities are also in high demand, particularly in Toronto and Vancouver. With more people moving to these cities, rental demand is expected to remain strong over the coming years. However, rental markets in smaller urban centers and rural areas are also seeing strong growth.

Graeme Moss, founder at a Hamilton, Ontario mortgage broker, believes that the ‘opportunity will remain for the broker and agent community, and their clients.’

Pineapple’s Financial Performance

The company’s recent financial results can be summarized as follows:

  • Growing topline revenue from a tiny base

  • Increasing operating loss

  • Higher cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue


Total Revenue

% Variance vs. Prior

FYE August 31, 2022

$ 3,600,851


FYE August 31, 2021

$ 2,983,717

Operating Profit (Loss)


Operating Profit (Loss)

Operating Margin

FYE August 31, 2022

$ (2,715,859)


FYE August 31, 2021

$ (235,724)


Comprehensive Income (Loss)


Comprehensive Income (Loss)

Net Margin

FYE August 31, 2022

$ (3,015,283)


FYE August 31, 2021

$ (388,401)


Cash Flow From Operations


Cash Flow From Operations

FYE August 31, 2022

$ (1,834,910)

FYE August 31, 2021

$ 668,555

(Glossary Of Terms)

(Source – SEC)

As of August 31, 2022, Pineapple had $3.9 million in cash and $1.8 million in total liabilities.

Free cash flow during the twelve months ended August 31, 2022, was negative ($1.8 million).

Pineapple’s IPO Details

Pineapple intends to raise $21.1 million in gross proceeds from an IPO of its common stock, although the final amount may differ.

The firm has authorized multiple classes of stock, as follows:

  • Common stock – one vote per share and economic rights

  • Class A stock – no voting rights but economic rights in priority to other classes

  • Class B stock – one vote per share and economic rights

  • Class C stock – no voting rights but lower priority economic rights

As of the filing, only common stock has been issued and outstanding.

The S&P 500 Index no longer admits companies with multiple classes of stock.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

approximately 40% for improving our technology.

approximately 15% for developing our subsidiary Pineapple Insurance.

approximately 20% for expansion of our business in North America and globally.

the remainder for working capital and other general corporate purposes.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management did not characterize legal proceedings against the firm, if any.

The sole listed bookrunner of the IPO is EF Hutton.

Commentary About Pineapple’s IPO

PAPL is seeking U.S. public capital market investment to fund its growth activities and invest in upgrading its technology offerings.

The company’s financials have produced increasing topline revenue from a tiny base, higher operating loss and growing cash used in operations.

Free cash flow for the twelve months ended August 31, 2022, was negative ($1.8 million).

Selling, G&A expenses as a percentage of total revenue have risen sharply as revenue has increased; its Selling, G&A efficiency multiple was only 0.2x in the most recent reporting period.

The firm currently plans to pay no dividends for the foreseeable future and to reinvest any earnings back into the company’s growth initiatives.

The market opportunity for providing technology solutions to brokers in Canada has been substantial but faces an unknown future growth rate due to rising unaffordability of housing and higher interest rates, which tends to put a damper on real estate activity.

EF Hutton is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (60.5%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

Risks to the company’s outlook as a public company include growing risks of a recession as the global economy slows down due to inflation and a higher cost of capital environment.

When we learn more about the IPO’s pricing and valuation assumptions, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

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