The market momentum that began for IPOs in the last half of 2013 came to an abrupt halt in the first quarter of 2014 when the collapse of the market for new mining issues combined with an absence of activity on the TSX created the worst quarterly result in five years, finds a survey by PwC.
The only sign of life for the IPO market during the period were two new issues worth $3.8 million on the TSX Venture. In contrast, there were four new issues with a value of $422 million on all Canadian exchanges during the first quarter of 2013.
Prior to the first quarter, the lowest quarterly tally for proceeds from new issues was $2.5 million, reported in the Q1 2009.
It was the fourth time since 2008 that the quarterly PwC survey reports no new issues on the TSX. There was no activity on the TSX in the third quarter of 2008, the first quarter of 2009 and the first quarter of 2012.
With the pipeline of new issues virtually empty, prospects for a quick turn-around do not look encouraging according to Dean Braunsteiner, national IPO services leader at PwC.
“This time last year, REITs were driving the market,” Braunsteiner says. “But concerns over interest rates have sidelined that market for now. With a damper on commodity prices and a big question mark over China, the extractive industries aren’t in a position to pick up the slack. The tech sector in the US is certainly active, and in a few months we might see a similar spark in Canada.”
The lull in the market could have one positive result, he adds.
“This is the time when companies thinking about an IPO are getting their houses in order,” he says. “Companies with good track records will do better in a market where investors favour security and returns. This will be their time to shine.”