Initial Public Offering (IPO) Risk Disclosure

About this disclosure

Wealthsimple Investments Inc. ("WSII," "we," or "us") may from time to time offer eligible clients the opportunity to participate in initial public offerings ("IPOs") through the Wealthsimple platform. This document explains the key risks associated with investing in IPOs so that you can make an informed decision about whether participating is right for you.

Participating in an IPO is not suitable for every investor. IPO securities can be highly speculative, and you may lose some or all of the money you invest. You should read this disclosure carefully, along with the issuer’s prospectus or registration statement, before deciding whether to participate.

This disclosure is general. It does not replace the issuer-specific risk factors set out in the offering document for any particular IPO, which you must read before deciding to participate.

Where to find information about a specific IPO

Before investing in any IPO, you should obtain and carefully read the issuer’s offering documents. These documents contain detailed information about the company’s business, financial condition, management, risks, and the terms of the securities being offered.

• Canadian IPOs: The preliminary and final prospectus are filed with the Canadian Securities Administrators (CSA) and are publicly available through SEDAR+ at sedarplus.ca. 

• U.S. IPOs: The registration statement (typically on Form S-1 for U.S. issuers or Form F-1 for foreign private issuers) is filed with the U.S. Securities and Exchange Commission (SEC) and is publicly available through EDGAR at sec.gov. Some U.S. IPOs are offered to Canadian residents through a Canadian prospectus, which would also be publicly available through SEDAR+ at sedarplus.ca. For U.S.-only IPOs, these IPOs will be offered to Canadian residents through WSII under available exemptions from Canadian prospectus requirements. See "U.S. IPOs offered under exemption" below.

The prospectus or registration statement is the single most important document you can review before deciding to invest. It contains issuer-specific risk factors that may not be addressed in this general disclosure.

Key risks of investing in IPOs

The risks below are general in nature. Each IPO carries its own specific risks, which are described in the issuer’s offering documents. The list below is not exhaustive.

Limited operating history

A company conducting an IPO may have a relatively short operating history, especially if it is in an early stage of growth. With limited historical financial information and a shorter track record, it can be difficult to evaluate the company’s current performance or assess its long-term prospects. Much of the information available to you will come from the prospectus itself.

Different types of issuers

Not every IPO is an established operating company. IPOs offered through WSII may include a range of issuer types, each with its own structure, governance, and risk profile. Common types include:

• Operating companies. Traditional businesses that generate revenue from selling products or services. Most IPOs fall into this category.

• Closed-end funds (CEFs) and business development companies (BDCs). Investment vehicles that raise capital at IPO and invest it in a portfolio of securities or loans according to a stated strategy. These are not operating businesses; returns depend on the manager's investment decisions and the underlying portfolio.

• Special purpose acquisition companies (SPACs). “Blank cheque” companies formed to raise capital and then identify and acquire a target business. At IPO, a SPAC has no operating business, no identified target, and no operating revenue.

• Real estate investment trusts (REITs). Vehicles that own and operate income-producing real estate (or real estate-related debt) and are typically required to distribute most of their income to unitholders.

• Royalty trusts, income trusts, and limited partnerships. Pass-through vehicles that hold rights to income from a defined pool of assets, or that operate as a limited partnership rather than a corporation.

• Variable interest entity (VIE) structures. Some foreign issuers (particularly those operating in jurisdictions that restrict foreign direct investment) list using VIE structures, where what you purchase is a contractual right to economic interests in the operating company rather than direct ownership. 

Beyond the risks of a traditional operating-company IPO, these structures may involve additional considerations such as:

• No operating business. SPACs and many investment vehicles do not run an operating business, so there may be no historical financial performance to evaluate.

• Heavy reliance on management or sponsor. Returns may depend significantly on the skill, judgement, and continued involvement of the manager or sponsor.

• Leverage. Some vehicles borrow to enhance returns, amplifying both gains and losses.

• Premiums and discounts to underlying value. CEFs and BDCs may trade at persistent discounts or premiums to net asset value, which can affect the price you receive on sale.

• Distributions and tax treatment. Pass-through vehicles can result in distributions and tax reporting that differ materially from common-stock dividends.

• Complex securities. Some IPOs include warrants, units, or other securities with separate trading characteristics, expiry mechanics, or dilution effects.

• Time-limited mandates. SPACs operate within a fixed period (typically 18–24 months) to complete a transaction. Failure to do so generally results in liquidation and return of trust capital, which may be less than the IPO price net of fees.

• Sales loads and sponsor compensation. Some vehicles build selling concessions or sponsor “founder” share dilution into the offering price, reducing the proceeds available to the underlying business or strategy.

The issuer’s offering documents will identify the specific type of vehicle and its associated risks. You must read those carefully before deciding to participate.

Price volatility

The market price of an IPO security can fluctuate significantly, particularly in the days, weeks, and months following the initial public listing. Volatility may be driven by:

• Limited trading liquidity in the early days of listing

• Broader market sentiment and conditions

• Speculative trading activity

• Factors entirely unrelated to the issuer's actual business performance

Strong or weak performance on the first day or first year of trading is not a reliable indicator of long-term performance.

No established trading history

Before an IPO, there is generally no public trading market for the issuer’s securities. There is no guarantee that an active or liquid trading market will develop after the IPO closes. The IPO offering price is negotiated between the issuer and the underwriters and may not reflect the price at which the securities will trade in the secondary market. The price shortly after listing may be significantly higher or lower than the IPO offering price.

Tax treatment

Tax outcomes can vary depending on the specific security and your individual circumstances. For example:

• U.S.-listed securities can carry different tax considerations than Canadian-listed securities, including foreign property reporting obligations and currency conversion when calculating gains and losses.

• Withholding taxes may apply to dividends or other distributions, particularly on U.S.-listed securities, and the recoverability of withheld amounts will depend on your account type and personal situation.

• Becoming a significant shareholder in the issuer can trigger additional tax rules and reporting obligations.

This is not an exhaustive list. Wealthsimple does not provide tax advice. Talk to a tax professional if you're unsure how the acquisition of an IPO security might affect your tax situation.

Allocation risk

IPOs are typically oversubscribed, meaning more investors want shares than are available. As a result:

• You may receive a smaller allocation than you requested, or no allocation at all

• WSII receives an allocation from the underwriting syndicate, and re-allocates those shares among eligible clients using a two-step process that uses a randomized selection of eligible requests, followed by a sizing process that takes into account a number of factors, including the size of each selected request. Our allocation methodology is described in our IPO Access FAQ

• Receiving an allocation in one IPO does not entitle you to allocations in future offerings

Lock-up periods and restricted resale

Some securities of the IPO issuer may be subject to lock-up periods or other resale restrictions. While these typically apply to insiders and pre-IPO investors rather than IPO purchasers, the expiration of a lock-up period can lead to a significant increase in the supply of shares trading in the market, which may put downward pressure on the share price.

Dilution risk

After an IPO, an issuer may raise additional capital by issuing more equity, convertible securities, or debt. These additional issuances may dilute the ownership percentage and economic interest of existing shareholders, including investors who participated in the IPO. New debt or preferred share issuances may also create securities with rights senior to common shareholders.

Dependence on key personnel

The success of a newly public company often depends heavily on a small number of key executives or other personnel. The loss of any of these individuals could materially impact the company's business operations, financial performance, and share price.

Concentration risks (suppliers and customers)

Some issuers depend on a limited number of suppliers or customers. The loss of a major supplier, customer or any disruption in those relationships can have a significant negative impact on the issuer's business and financial condition.

Intellectual property risks

Issuers in technology, life sciences, and other innovation-driven sectors may rely heavily on patents, trademarks, trade secrets, or licensed technology. Disputes, infringement claims, or the inability to protect intellectual property can lead to costly litigation and meaningful business disruption.

Competition

Newly public companies often compete with larger, more established competitors that have greater financial, operational, and technical resources. A new issuer may struggle to gain or maintain market share against more entrenched competitors.

Technological and industry change

Issuers in fast-moving sectors such as technology, biotech, or clean energy face the risk that their products, services, or technologies will be rendered obsolete by rapid innovation or shifting customer preferences. This can have material adverse effects on the issuer’s business and share price.

Regulatory and macroeconomic risk

The value of an IPO security may be affected by changes in laws, regulations, tax policy, interest rates, currency exchange rates, or broader economic conditions. Certain industries (for example, financial services, healthcare, or energy) are particularly sensitive to regulatory change.

Risks specific to foreign issuers

If the IPO is conducted by a foreign issuer, additional risks may apply, including:

• Currency fluctuation

• Differences in accounting standards and disclosure practices

• Political, legal, and regulatory differences in the issuer's home jurisdiction

• Tax treatment that may differ from Canadian-listed issuers

• VIEs carry additional legal, corporate governance, and enforcement risks that are not present in conventional equity ownership.

Settlement and payment

Settlement is when payment for your shares is finalized and the shares are delivered to your account. Timing differs by jurisdiction:

• U.S. IPOs settle on a T+1 basis, which is one business day after the IPO trade date.

• Canadian IPOs settle at closing, which is typically 5 to 10 business days after the IPO is priced.

Your account must have sufficient cash to settle the trade through to the settlement date. If you do not have sufficient cash to settle, your trade may be cancelled and you may be subject to additional consequences as described in your account agreement. If you're transferring funds in, allow a few business days for the deposit to settle before the request deadline.

Currency risk 

Some IPOs are priced and settled in U.S. dollars. If you participate using the Canadian dollar balance in your account, your trade will be subject to currency conversion at the time of purchase. Changes in the CAD–USD exchange rate may affect your returns, independent of how the underlying security performs.

U.S. IPOs offered under exemption

WSII offers certain U.S.-only IPOs to eligible Canadian clients under available exemptions from Canadian prospectus requirements. As a result:

• Such U.S.-only IPOs are offered only to clients who qualify as "accredited investors" under Canadian securities laws.

• Because each U.S.-only IPO is offered to you under an exemption from Canadian prospectus requirements, you will be required to sign a risk acknowledgement form each time you participate in a U.S. IPO. Without a signed acknowledgement, your indication of interest will not be processed.

• You will not have the 2-business-day right of withdrawal that applies to purchases under a Canadian prospectus.

• The statutory rights of action for misrepresentation that arise under Canadian securities legislation in respect of a prospectus offering do not apply in the same form to U.S. IPOs offered under exemption. You may still have rights under U.S. securities laws against the issuer or the underwriters; please consult a qualified legal or financial advisor about those rights.

• You should rely on the U.S. registration statement filed with the SEC for issuer-specific disclosure.

Risks specific to participating through WSII

In addition to the general risks of IPO investing, you should be aware of the following considerations when participating in an IPO through the Wealthsimple platform:

We act as a dealer, not an advisor

WSII is a dealer, offering you the ability to purchase securities on a “self-directed” basis. This means we do not provide investment advice or recommendations as to whether a specific IPO is suitable or appropriate for you. Any decision to participate in an IPO is yours alone. You are responsible for reviewing the offering documents and assessing whether the investment is appropriate given your financial situation, objectives, and risk tolerance.

Allocation is not guaranteed

Eligibility to indicate interest in an IPO through WSII does not guarantee that you will receive an allocation. WSII’s allocation from the underwriting syndicate, and the methodology by which we re-allocate to clients (as described above), mean that allocations may be reduced, partially filled, or completely unfilled. You will be notified of your final allocation, if any, before trading begins.

Cancellation and changes to the offering

An IPO may be delayed, restructured, repriced, or cancelled at any time before closing, including after you have submitted an indication of interest. WSII is not responsible for losses or missed opportunities resulting from changes to an offering’s terms or timing.

Limited information from WSII

Securities laws restrict what an issuer and its selling group members (including WSII) can communicate about an IPO during the offering period and through the issuer’s quiet period (which generally ends 25 days after the IPO date). The information we are permitted to share is largely drawn from the issuer’s offering documents. You should not rely on social media posts, news articles, podcasts, influencer commentary, or any informal communication as a basis for your investment decision.

Flipping policy

Selling (or transferring off the WSII platform) your IPO shares within 90 days of the IPO is known as "flipping." Underwriters discourage flipping and may exclude WSII from future IPOs if we permit it. If you flip your IPO shares, you may be restricted from participating in IPO Access in the future. See our IPO Access FAQ for details.

Restricted person attestation

Before participating in any IPO, you will be asked to attest that you are not a restricted person under our IPO Access Restricted Persons Policy. Providing false or misleading information in connection with that attestation may constitute a violation of applicable securities laws or CIRO rules and may result in cancellation of any allocation received, disgorgement of profits, permanent loss of access to IPO Access, and reporting to regulatory authorities where required by law.

Important reminders

• Read the prospectus or registration statement before deciding to participate. It contains issuer-specific risks not covered here.

• You may lose money. IPO investments can decline in value, sometimes substantially, and you may not be able to sell your shares for what you paid.

• Past performance is not indicative of future results. Strong first-day or first-year performance does not mean an IPO will perform well long-term.

• Diversify. Consider how an IPO investment fits into your overall portfolio. Concentrating too much in any single security, especially a newly public one, can amplify risk.

• Ask questions. If you don’t understand something about an IPO or the risks involved, consider speaking with a qualified legal, tax, or financial advisor before investing.

For more information

• See our Help Centre.

• See our IPO Policy.

• Canadian regulators (CSA): securities-administrators.ca

• SEDAR+ (Canadian filings): sedarplus.ca

• Investor education (CIRO): ciro.ca

• SEC (U.S. IPOs): sec.gov/files/ipo-investorbulletin.pdf

• EDGAR (U.S. filings): sec.gov/edgar

Questions?

If you have questions about this disclosure or about IPOs in general, you can contact Wealthsimple support here. 

This disclosure is provided for informational purposes only and does not constitute investment, legal, or tax advice. The information in this disclosure is current as of May 2026. Wealthsimple may update this disclosure from time to time. The most current version will be made available on our website.