Dismal second quarter leaves Canadian IPO market flat, PwC survey says

TORONTO, July 4, 2016 /CNW/ - Investors hoping for a rebound in the Canadian market for initial public offerings will have to wait a little longer, a survey by PwC has revealed.

A single new issue of $550,000 on the CSE was the only IPO on any Canadian exchange in the second quarter of 2016, the PwC survey showed. There was no new equity issued on either the TSX or the TSX Venture during the quarter.

For the first half of 2016, just two new issues on the CSE generated just over $1 million — the lowest half-year total for Canadian exchanges in recent memory.

By comparison, 13 new issues from a diversified list of industries raised $1.4 billion in new equity on all Canadian exchanges in the first half of 2015.

The pipeline of potential new issues doesn't give much hope for optimism in the short term, says Dean Braunsteiner, PwC national IPO leader.

"Over the past decade or more, the Canadian IPO market has usually been driven by one or two sector engines that helped power the entire market," he explains. "For many years, it was the mining sector, where both mature companies and juniors kept the TSX and the Venture busy. Oil and gas issues also played a part. For a while, income trusts drove the market. Then REITs had their day in the sun. Recently, we've seen special purpose acquisition companies get the spotlight. But today, there's no single driver of the market and the lack of potential new issues in the pipeline is indicative of that."

Global market uncertainty following the U.K. vote to leave the EU has poured cold water on any remaining enthusiasm for IPOs in the near term, Braunsteiner acknowledges. But a weak pulse from the IPO market doesn't mean that Canadian equity markets are in ill health, Braunsteiner hastens to point out. In fact, the opposite is true.

Prior to the post-Brexit vote swoon, the Canadian equity market had been on a solid upward swing, Braunsteiner notes, and the market for secondary offerings had been gaining ground. In fact, the previously moribund mining sector enjoyed notable activity, where companies in mid-stage development have been attracting buyers to secondary issues.

What will it take to get the Canadian IPO market back on track?

"It's not that there's a shortage of investors," Braunsteiner says. "What's missing is any sense of certainty about the future. Every region, every country is reviewing its economic outlook. In Canada, there's concern about the housing market. Until some of those clouds dissipate, we can't expect too much from the IPO market."

PwC has conducted its survey of the IPO market in Canada for more than 15 years. The reports are issued on a quarterly basis to provide information to the corporate sector, investors, the media and others that will help them put the market into better perspective. For the purposes of the survey, investment vehicles such as structured products are not considered IPOs because they do not represent new equity raised for operating companies.

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at http://www.facebook.com/pwccanada.

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SOURCE PwC (PricewaterhouseCoopers)

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