TORONTO, January 7, 2008 — Fourth quarter activity in the resource sectors, with a single large mining issue in the closing days of 2007, pulled the Canadian market for initial public offerings (IPOs) above its lowest level in recent history, the annual PricewaterhouseCoopers (PwC) survey of Canadian equity markets has revealed.
Even with a strong fourth quarter, the 2007 results were the lowest since 2001 when there was a recorded all-time low for the previous decade. In all, 90 IPOs made it to the TSX and TSX Venture exchanges for a combined value of $3.4 billion. By comparison, 109 new issues worth $5.6 billion were issued on those markets in 2006.
There were 19 new issues in the last quarter of 2007 on the TSX with a value of $2.1 billion, compared to five IPOs on the TSX with a value of $987 million during the same period of 2006 — the period following the federal government’s change to the tax treatment of income trusts.
The $1.1 billion fourth quarter IPO by Franco-Nevada on the TSX saved the 2007 results from resembling 2001. Without that offering, the value of IPOs on the TSX and TSX Venture exchanges would have been $2.3 billion, just slightly higher than $2.1 billion in 2001.
For all of 2007, there were 36 new issues on the TSX with a combined value of $3.0 billion, down from 54 IPOs worth $5.4 billion on that exchange in 2006.
The TSX Venture exchange recorded 15 new issues in the fourth quarter of 2007 with a combined value of $113 million, and closed out the year with 54 issues for a total value of $382 million. There were 55 new issues on the TSX Venture in 2006 at a total value of $250 million.
“A host of different factors conspired against the IPO market last year,” observed Ross Sinclair, national leader of PwC’s IPO and income trust services.
“The environment in 2007 was anything but predictable and stable,” Sinclair said. “The impact of the loss of income trusts in the market was felt most of the year, as potential issuers tried to chart a course for the future. At the same time, there were wild swings in the market – volatility over weeks and months that makes pricing a new issue almost impossible. And finally, the uncertainty in the credit markets left many participants distracted and alarmed. In many ways, it’s amazing we got to the levels we did.”
Resurgent activity in the mining, energy and related sectors kept 2007 from being much worse, Sinclair believes, and points to a number of trends worth watching as 2008 unfolds.
“Activity in the fourth quarter of 2007 was restricted to very specific areas — commodities, utilities and emerging renewable energy industries. With more of these and other issues in the pipeline, the IPO market in these sectors could find some momentum. But we don’t see much diversity across the market for new issues,” Sinclair cautioned, “so any recovery is unlikely to be broadly based. That makes predictions for 2008 very difficult.”
The annual PwC survey of Canadian equity markets breaks down IPO activity into nine market sectors: consumer products, energy and utilities, financial services, forest and paper, healthcare, industrial products, mining, oil and gas, and technology. Activity is measured on the major national exchanges.
For more information please visit www.pwc.com/ca/iposurveys.
About PricewaterhouseCoopers
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. Now celebrating 100 years of excellence in Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,200 partners and staff in offices across the country.
“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.
