Diversity in offerings, exchanges highlight third quarter IPO market

Oct 01, 2018

Toronto,October 1, 2018. Promising activity for real estate investors, an emerging luxury goods segment, cross-border listings, a surge of activity on Canada’s newest exchange and, of course, cannabis: it seems there was something for everyone in third quarter initial public offerings (IPO) activity in Canada.

That’s the conclusion of the quarterly PwC survey of the Canadian IPO market, released here today.

Markets shook off the summer doldrums with $792 million from 12 issues of new equity in the third quarter of 2018, the PwC survey showed, including $451 million from three IPOs on the TSX in the quarter. In the same period of 2017, nine new issues in Canada delivered $433 million.

The third major issue of the year from a real estate investment trust, the $200 million issue by Minto Apartment Real Estate Investment Trust on the TSX, attracted investor interest, notes Dean Braunsteiner, national IPO leader at PwC in Canada. “It’s a welcome return for a sector that has been very quiet recently,” says Braunsteiner. “I would expect to see more REIT issues in the future.”

The MAV Beauty Brands’ $241 million issue on the TSX during the quarter is the third premium consumer product company to join the market recently, Braunsteiner points out, joining last year’s issues by Canada Goose and Roots.

The third quarter was notable for the two new issues from Canadian-domiciled companies on the NASDAQ exchange in the U.S., including the closely-watched $202 million IPO of medical cannabis company Tilray Inc. It was the second-largest issue during the quarter. Electrameccanica Vehicles Corp. also took a path to public ownership through NASDAQ. “For some companies, a U.S. listing is an efficient way to attract U.S. investors,” Braunsteiner observes.

The Tilray issue, the $100 million offering of Charlotte’s Web Holdings Inc. on the CSE, RMMI Corp. on the CSE for $4 million and the reverse take-over of Venture-listed AIM 2 Ventures capital pool by Canopy Rivers Inc. helped keep cannabis investments in the headlines during the quarter, says Braunsteiner. But the number of new issues from the cannabis sector and the popularity of reverse take-overs suggests there’s an alternate route to public ownership via the CSE. “The regulatory environment cannabis firms have to navigate to get directly to public markets is pretty rigorous,” he explains, “with pretty detailed scrutiny of licensing and business plans in any conventional IPO. Companies with exposure to the U.S. market see a clearer track through the CSE.”

The PwC survey does not count reverse take-over transactions or junior capital pools as IPOs and, as such, does not include Canopy Rivers in the third quarter results.

The surge of activity on the CSE, with five new issues during the quarter and 14 so far this year, has put that exchange onto investors’ and issuers’ radar, Braunsteiner adds. In addition to the Charlotte’s Web IPO, new issues from the mining and real estate sectors made it to market on the CSE in the quarter.

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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