Dismal 2016 for Canadian IPO market: PwC survey

A trickle of new issues in the fourth quarter saved 2016 from being a complete washout for initial public offerings on Canada’s largest equity exchange, says a PwC survey of the IPO market. But the survey, which has been done since 1998, shows last year was still the worst it has seen for Canadian IPOs.

For example, the $400-million Aritzia Inc. IPO in October was one of just three new issues on the TSX during the entire year. It was also one of only eight new issues on all exchanges in Canada during 2016, the annual PwC survey reveals.

Read: Canadian IPO market at critical juncture

Two other small issues on the TSX in the final months of the year brought the quarterly and annual tally for Canada’s senior exchange to $464 million, the survey adds.

The previous low-water mark for Canada’s IPO market was set during the financial crisis of 2008, says PwC, when just 57 new issues struggled to reach Canada’s equity markets and a mere 10 were registered on the TSX. There were no new IPOs on the TSX in the final six months of 2008. The value of all issues on Canadian markets in 2008 was $682 million, with $547 million on the TSX.

What happened in 2016?

There’s no shortage of explanations for the poor 2016 IPO market performance, says Dean Braunsteiner, national IPO leader at PwC in Canada. These include the hangover from the European debt crisis, the shock of the Brexit vote in the U.K. and the U.S. presidential election campaign, which all contributed to the uncertainty that plagued the IPO markets in Canada and in other developed global markets.

But with those events behind us, Braunsteiner sees positives on the horizon.

“The IPO market always lags the traditional equity market,” explains Braunsteiner. “Markets in Canada and the U.S. have marched higher since the U.S. election, [and] companies considering IPOs are watching that steady upward trend like everyone else. They won’t want to get left behind.”

Braunsteiner points to the tech sector as one possible starting point for IPO revival. He also suggests watching the relative strength of the market for secondary equity issues as evidence that investors welcome new opportunities.

Braunsteiner notes, “The year after the previous market low of 2008, the IPO market in Canada bounced back to $1.8 billion in 2009 and $5.5 billion a year after that.”

Read: Now’s the time to find returns with shareholder activism

Staff

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