Sleepy Canadian IPO market belies pent-up demand: PwC

TORONTO (October 2, 2012) – The market for initial public offerings fell quiet in the third quarter, but the background noise of new issues waiting for the right opportunity to reach Canadian equity markets suggests that activity in the balance of the year could yet redeem a lackluster 2012, a quarterly survey of IPO activity in Canada by PwC suggests.

Just seven new issues with a total value of $271 million were recorded on all Canadian exchanges in the third quarter of 2012, the PwC survey showed. There was a single IPO on the TSX during the period with a value of $212 million.

There were 20 new issues on all exchanges during the same period of 2011 with a total value of $537 million, including four IPOs on the TSX worth $475 million.

In the first three quarters of this year, 39 IPOs were registered on all Canadian exchanges with a total value of $441 million, including three new issues of equity valued at $397 million on the TSX, according to the survey. Those figures are down from the first three quarters of 2011, when all Canadian exchanges registered 54 new equity issues with a value of $1.9 billion (14 IPOs on the TSX for $1.7 billion).

The slow pace of new issues could all change in the fourth quarter if a few of the current market roadblocks are cleared, according to Dean Braunsteiner, PwC national IPO services leader.

“There are some very significant IPOs in the pipeline that could revive the total IPO market and turn around the year, but it will require the resolution of some thorny issues beyond our borders,” says Braunsteiner.”

Persistent concerns over the debt crisis and current question marks about Spain continue to cast a long shadow in the market, Braunsteiner says, while the slow pace of recovery in the U.S. weighs heavily on many investors. Although a slide in commodity prices earlier in the quarter has been reversed, that temporarily put the brakes on activity in the mining sector– a sector that has traditionally been a driver of Canadian IPO activity.

“What is encouraging is the size of the IPOs we see coming, and the diverse nature of the issuers,” says Braunsteiner. “When we see issues planned for real estate, renewable energy and other sectors alongside activity from a rejuvenated mining sector, it is a sign of broader market strength. Even if some of those residual issues could be cleared and some form of stability returns to the markets, a more buoyant fourth quarter is still a possibility.”

The low-point of the past decade was 2008, when 57 issues generated just $682 million on all exchanges in Canada for the entire year. The IPO market set records in 2005 with 119 issues and $7 billion in new equity during the height of the popularity of income trusts.

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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