Canadian IPO market struggles to hit $2 billion in 2011: PwC Survey

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TORONTO, Jan. 3, 2012—The Canadian market for Initial Public Offerings (IPOs) nearly ground to a halt in the fourth quarter of 2011 as the total IPO market struggled to peak at $2 billion for the year, which is the third lowest total for any year since 2001, according to the annual PwC review of IPO activity.

Only 2008 (57 issues for $700 million) and 2009 (28 issues for $1.8 billion) were lower in the past decade.

The PwC survey showed a single $25 million issue on the TSX in the fourth quarter and a reduction in activity on the TSX Venture exchange generated just $52 million from 10 new issues on all Canadian exchanges in the final three months of 2011. In the same period in 2010, 31 IPOs generated $1.2 billion in new equity.

Despite a mid-year growth spurt, 2011 saw the total number and value of IPOs decline vs 2010. The 61 new issues on all Canadian exchanges in 2011 generated just over $2 billion compared to 73 IPOs worth more than $5.5 billion the previous year.

The decline in activity on the TSX set the tone for the year: 15 new issues on the senior exchange accounted for $1.8 billion in new equity in 2011 compared to 25 IPOs worth $5.1 billion in 2010.

“The European debt crisis weighed heavily on the final quarter of 2011,” says Dean Braunsteiner, PwC national IPO Services leader. “The wild fluctuations in equity markets in the last quarter caused by the European debt crisis made timing for any kind of IPO extraordinarily difficult. Finding a stable market to launch an IPO was nearly impossible in the last quarter and the results are a testament to that volatility.”

Braunsteiner adds, “The European debt crisis was just the most recent in a catalogue of calamities that created a difficult market for IPOs in 2011. The natural disasters in Japan, political upheaval in countries like Egypt and Libya, congressional stalemate over borrowing in the U.S., and concerns over slowing growth in China and its impact on commodities all ganged up on the market. Given that the markets were ruled by crises in 2011, the results were not as bad as they might have been.”

The outlook for 2012 depends on a final resolution of the European debt crisis. “If we can see an end to that in the first quarter, the IPO market has a chance to regain some stability in the last half of the year,” says Braunsteiner. “We know there are companies with IPOs ready to go. They just need some assurance of stability.”

PwC has conducted its survey of the IPO market in Canada for more than 10 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.

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