Canadian IPOs 
MIA in flat market, 
PwC survey says

The following is an edited release from PwC. For more information, please visit www.pwc.com.

 

Investors hoping for a rebound in the Canadian market for initial public offerings (IPOs) will have to wait a little longer, according to a PwC survey.

A single new issue of $550,000 on the Canadian Securities Exchange (CSE) was the only IPO on any Canadian exchange in the second quarter of 2016, the survey showed. There was no new equity issued on either the TSX or the TSX Venture exchanges during the quarter.

This first half, two new issues on the CSE generated just over $1 million — one of the lowest half-year totals for Canadian exchanges.

By comparison, 13 new issues from a diverse list of industries raised $1.4 billion in new equity on all Canadian exchanges in the first half of 2015.

The pipeline of potential new issues doesn’t give much hope for optimism in the short term, PwC national IPO leader Dean Braunsteiner says.

“Over the past decade or more, the Canadian IPO market has usually been driven by one or two sector engines that helped power the entire market,” he says. “For many years, it was the mining sector, where both mature companies and juniors kept the TSX and the Venture busy. Oil and gas issues also played a part. For a while, income trusts drove the market. Then real estate investment trusts had their day in the sun. Recently, we’ve seen special purpose acquisition companies get the spotlight. But today, there’s no single driver of the market and the lack of potential new issues in the pipeline is indicative of that.”

Global market uncertainty after the U.K. vote to leave the European Union has poured cold water on any enthusiasm for IPOs in the near term, Braunsteiner says. But a weak pulse from the IPO market doesn’t mean that Canadian equity markets are in ill health, Braunsteiner hastens to point out. In fact, the opposite is true.

Before the post-Brexit vote swoon, the Canadian equity market had been on a solid upward swing, he says, and the market for secondary offerings had been gaining ground. In fact, the previously moribund mining sector enjoyed activity, where companies in mid-stage development have been attracting buyers to secondary issues.

What will it take to get the Canadian IPO market back on track?

“It’s not that there’s a shortage of investors,” Braunsteiner says. “What’s missing is any sense of certainty about the future. Every region, every country, is reviewing its economic outlook. In Canada, there’s concern about the housing market. Until some of those clouds dissipate, we can’t expect too much from the IPO market.”

PwC has conducted its survey of the IPO market in Canada for more than 15 years. The reports are issued on a quarterly basis to provide information to the corporate sector, investors, the media and others that will help them put the market into better perspective. For the purposes of the survey, investment vehicles such as structured products are not considered IPOs because they do not represent new equity raised for operating companies.