Canada’s initial public offering (IPO) market set a five-year record in 2017, with a total of $5.1 billion in proceeds raised by 38 new equity issues, according to a survey by PwC. Activity was supported by an especially strong fourth quarter that saw $1.7 billion raised, in large part due to revived mining IPOs. Private equity- and venture-backed IPOs also played a key role in 2017 trends and could continue to exert influence in 2018, PwC National IPO Leader Dean Braunsteiner said. PE Hub Canada in December estimated that a dozen private equity- and venture-backed IPOs raised $2.3 billion last year.
Strong fourth quarter, mining resurgence propel $5.1 billion Canadian IPO market
TORONTO, Jan. 2, 2018 /CNW/ – The 2017 market for initial public offerings (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, the annual PwC survey revealed today.
Driven by heavy activity in the mining sector, a strong final quarter of 2017 raised $1.7 billion in new equity from 13 new issues, the PwC survey showed, helping to lift the full-year tally to $5.1 billion from 38 issues from Canadian companies or companies listing on Canadian exchanges. The fourth quarter tally includes the $728 million dual listing of Luxembourg-incorporated Nexa Resources S.A. on the TSX and the NYSE.
The TSX welcomed seven new listings in the last quarter with a value of $1.5 billion. A total of 17 IPOs were completed on the TSX in 2017, delivering $4.7 billion to issuers, the PwC survey showed. Clementia Pharmaceuticals Inc. joined Nexa in sending an IPO to U.S. investors with its $150.2 million issue on NASDAQ.
The rapid 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. 2016 marked the worst year for Canadian IPO activity in nearly 20 years with just eight new issues worth $464 million struggling to reach investors.
“A pretty dismal 2016 was followed by a buoyant 2017, a pattern we’ve seen over the years,” Braunsteiner says. “The seeds for the recovery of 2017 were sewn in the last quarter of 2016 and activity just continued to build all year.”
2017 also marks a welcome return of the mining sector to public markets after a prolonged absence, Braunsteiner says.
Six mining issues in the final quarter mark a significant development for that sector, Braunsteiner says. “It is significant that 20 mining issues made it to the TSX, CSE and Venture in 2017,” he notes. “It will be interesting to see if that activity percolates down to mid-tier and development companies, and what that portends for junior miners.”
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, Braunsteiner suggests.
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 the owners of firms with IPO potential are also keeping their options open for private sale.
Sectors that missed the wave in 2017 include the budding recreational and medicinal cannabis industry, which faced regulatory uncertainty, and the tech sector.
The emergence of the CSE as a viable alternative to the TSX-Venture in 2017 has Braunsteiner watching both exchanges carefully in 2018. “CSE certainly appears friendly to start-up enterprises,” he says. Nine IPOs on the CSE raised $9.5 million in 2017 while 10 issues raised $55.4 million on the Venture.
It is harder to predict the impact of the U.S. tax changes on the Canadian IPO market, 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,” Braunsteiner concludes.
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 included in overall survey results because they do not represent new equity raised for operating companies. New issues from companies that are created from the reverse takeover of an existing public company are also not included in the survey.
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