Canada’s initial public offering (IPO) market forged ahead in 2017, thanks to a strong fourth quarter and a resurgence in mining.
In fact, IPOs in Canada raced across the finish line to post a $5.1-billion, five-year record for total proceeds raised from new equity issues, reveals the annual PwC survey.
The recovery of the Canadian IPO market in 2017 confirms the recent boom-to-bust-to-boom cycle of this country’s new equity environment, says Dean Braunsteiner, PwC national IPO leader, in a release.
“A pretty dismal 2016 was followed by a buoyant 2017, a pattern we’ve seen over the years,” Braunsteiner says.
In 2016, Canadian IPO activity was the worst in nearly 20 years, with just eight new issues worth $464 million struggling to reach investors.
“The seeds for the recovery of 2017 were sewn in the last quarter of 2016, and activity just continued to build all year,” he says.
Six mining issues in the final quarter mark a significant development for that sector. Overall in 2017, there were 20 mining issues on the TSX, CSE and Venture exchanges. “It will be interesting to see if that activity percolates down to mid-tier and development companies, and what that portends for junior miners,” says Braunsteiner.
Sectors that missed the wave in 2017 include the budding recreational and medicinal cannabis industry, which faced regulatory uncertainty, and the tech sector.
IPO market outlook
Stabilizing commodity prices and the interest in copper, lithium and cobalt driven by the potential for electric vehicles will likely influence the 2018 IPO market, suggests Braunsteiner.
Other notable trends from 2017 that could spill into 2018 include private equity firms monetizing their investments in Canadian companies via IPOs. Several high-profile new issues from companies like Roots, Canada Goose, Jamieson Wellness and Real Matters in 2017 suggest private equity and venture capital firms will catch the wave this year, Braunsteiner says. But he cautions that owners of firms with IPO potential are also keeping their options open for private sale.
It’s harder to predict the impact of U.S. tax reform on Canadian IPOs, says Braunsteiner. Canadian companies with U.S. operations may have a perceived advantage when coming to market here.
A strong IPO market will always rely on some basic principles, he adds. “We continue to see quality companies from across the spectrum complete successful offerings in a market where investors welcome well-run companies with good track records. There is money on the sidelines just waiting for the right opportunity,” he concludes.