A better-than-expected final quarter of 2018 brought IPOs in Canada to a C$2.2 bn ($1.6 bn) total for the year – less than half of the 2017 total, but still a ‘respectable’ finish for a market plagued with volatility and uncertainty, according to a PwC Canada survey of IPOs in the country.
The final quarter of 2018 saw 22 new issues on three Canadian exchanges deliver C$336 mn in new equity, down from the C$1.7 bn raised in 12 IPOs in the final quarter of 2017. In all of 2018, 54 new equity issues on four exchanges generated C$2.2 bn compared with the C$5.1 bn raised from 37 IPOs in all of 2017.
Smaller issues – and more of them – are typical of the Canadian IPO market, suggests Dean Braunsteiner, national IPO leader at PwC Canada. ‘The fourth quarter was pretty respectable when you consider the market volatility in December,’ he notes in a statement. ‘Unlike 2017, which was skewed by the single giant Kinder Morgan Canada offering, 2018 was reflective of a more normal market in Canada.’
The top 10 new issues in 2018 were C$100 mn or more, the survey reveals. The largest IPO of 2018 was the C$462 mn Ceridian HCM Holding issue in the second quarter. The second and third-biggest listings were MAV Beauty Brands (C$241 mn) and AltaGas (C$239 mn), making the top three issues very sectorally diversified. ‘I think that’s a testament to the diversity of the Canadian market,’ observes Braunsteiner.
Two Canadian-domiciled firms also listed on Nasdaq during 2018, the survey shows.
Two new issues on Toronto Stock Exchange (TSX) in the fourth quarter of 2018 raised C$254 mn, bringing the full-year tally to 11 IPOs worth C$1.8 bn on Canada’s senior exchange. The Canadian Securities Exchange (CSE) contributed 14 new issues during the quarter and the TSX Venture Exchange offered six.
While cannabis issues grabbed the headlines, the surge of activity on the CSE – which saw 28 IPOs for the full year – and a return of junior miners to the equity markets were also notable developments of 2018, Braunsteiner says. And while the recovery of the mining sector is welcome news, he adds that it is too early to say that the CSE has usurped the traditional role of the TSX Venture Exchange as the spawning ground for new mining plays.
‘The cost-efficient route to public ownership via the CSE certainly appealed to junior miners and other start-up companies that were focused on maximizing the new equity coming their way,’ Braunsteiner explains.
The CSE was also a popular route for cannabis companies: more than C$491 mn was raised for cannabis companies on various exchanges in 2018, according to the survey.
The view into the year ahead is less clear, Braunsteiner admits. Uncertainty about interest rates, the continuing Brexit saga and global trade tensions – all factors that disrupted markets at the end of 2018 – are expected to persist well into 2019, he says, making it difficult to value new issues and bring them to market.