Canadian IPO market at critical juncture

Is our traditional IPO market dead?

That’s one possible conclusion from today’s third-quarter PwC survey of Canadian equity markets. With just a single new issue of $690,000 for most of the three-month period ending September 30, the first three quarters of 2016 were shaping up as the worst on record — less than $2 million in new issues for the year to date with no IPOs on the TSX.

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Only news of the pending $400-million IPO of Vancouver-based apparel merchandiser Aritzia Inc. on the TSX in the dying days of the quarter kept the results from being the lowest in memory.

PwC national IPO leader Dean Braunsteiner points to a host of temporary influences that have kept the market stalled, and a list of positive factors that speak to market resilience and eventual recovery.

“Canadian mining companies are quietly making a comeback,” he notes, “with some of their share prices up substantially since January. Mining companies in production or in late-stage development have seen the benefit, with improved access to capital via secondary markets. That buoyancy hasn’t reached the junior miners yet, but it’s a hopeful sign.”

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The buoyancy of the secondary market and the popularity of new special-purpose investment companies and flow-through limited partnership companies is more evidence that the market has changed direction rather than withered, Braunsteiner adds.

The global IPO market has also been in the doldrums for most of 2016. The mega-deals that propelled IPO markets in the U.S., Europe and Asia have largely been missing, even as rising share prices and enthusiastic forward price-to-earnings multiples promise high prices for issuers waiting in the wings. It’s a matter of when – not if – big IPOs light up international markets, Braunsteiner says.

And while a blockbuster international issue wouldn’t necessarily kick-start the Canadian market, the oft-mooted flotation of a large Canadian utility like Toronto Hydro would have an immediate — and positive — impact on the entire market, he notes.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.