TORONTO, October 1, 2013 — Third quarter initial public offerings (IPOs) from a diverse array of sectors helped push total funds raised on Canadian equity markets to more than $2 billion so far in 2013, the quarterly PwC survey of the IPO market shows, but a depressed mining sector and questions about interest rates make the balance of the year difficult to predict.
Seven new offerings on all Canadian exchanges with a total value of $802 million in the third quarter out-paced the $271 million raised from seven IPOs in the same period of 2012, the PwC survey revealed. Five IPOs on the TSX raised $798 million during the third quarter of 2013 in comparison to a single new issue for $212 million in the same period of 2012.
The largest new issue of the quarter was the $400 million Choice Properties Real Estate Investment Trust from Loblaws. Added to the $294 million in REIT issues from the second quarter, this offering extended the real estate sector’s star performance in 2013, notes Dean Braunsteiner, PwC national IPO leader. But questions about when – and by how much — interest rates will increase have made the future of the popular REIT vehicles difficult to predict, Braunsteiner says.
“IPOs from a diverse list of sectors like energy, banking, transportation and technology suggests broad interest in the Canadian IPO market,” Braunsteiner adds, “but lacking a real ‘engine’ to drive the market, the last quarter of 2013 and the first part of 2014 will be hard to predict.”
The REIT market is very sensitive to interest rates, Braunsteiner explains, and even though at least one more major REIT issue is in the pipeline, an increase in rates leaves the long-term future of the sector as a question mark. The mining sector, long the engine of the Canadian IPO market, is still in the doldrums and shows no signs of recovery in the short term, Braunsteiner says.
The $2 billion in new equity raised from 23 new issues in the first three quarters of 2013 makes the year so far a modest success, he adds, ahead of the $491 million from 39 IPOs in the same period of 2012.
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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