Canadian innovators drive first quarter IPO market recovery, PwC survey shows

What a difference a year makes.

The Canadian market for initial public offerings rebounded in the first quarter of 2017, driven by innovative companies that could point to a trend for the rest of the year, the PwC quarterly survey of the IPO market reveals. Led by three new issues on the TSX worth $539 million, the year got off to its best start since 2015.

An additional three issues on the TSX Venture added $32 million in value for the quarter, bringing the total value of IPOs to $571 million from six new equity issues on all Canadian exchanges—the second-best initial quarter result in the past decade, the PwC survey reported. An additional $38 million was raised from the flotation of a Canadian company on the Hong Kong exchange.

By comparison, just a single issue made it to the CSE for a mere $600,000 in the first quarter of 2016.

As important as the number of IPOs and the value of new equity is the innovative nature of the first quarter’s market debutantes, says PwC national IPO services leader Dean Braunsteiner.

“In their own way, the three headline IPOs on the TSX represent innovative companies catching the interest of investors and being rewarded for their efforts,” says Braunsteiner. “Freshii Inc. and Canada Goose Holdings are successful consumer product companies with strong brands and a mature approach to profitability and expansion. In the previous quarter, we saw clothing retailer Aritzia win good market acceptance. They’re all innovators in their categories.”

“The Fairfax Africa IPO this quarter is a special purpose acquisition company (SPAC), an innovative form of financing that first drew attention last year—another sign that innovation sells,” Braunsteiner says.

The Freshii IPO raised $125 million and the Canada Goose offering brought $340 million. Canada Goose was jointly listed on the TSX and the NYSE. The Fairfax Africa issue raised $74 million.

The optimism in U.S. equity markets has certainly spilled over into global markets, Braunsteiner says, and a buoyant U.S. economy is good news for Canadian companies that sell into the U.S. and that bring IPOs to the market here. That optimism has to be tempered somewhat by the lingering uncertainty surrounding the new U.S. administration’s handling of trade agreements, he adds.

Despite three new issues from mining companies on the TSX Venture, Braunsteiner says it’s too early to call an end to the long dry spell for junior miners seeking financing on the exchange. “We need to see the support of better commodity prices before we can see a solid future for this market,” Braunsteiner says. But private equity players waiting to IPO mature companies are recognizing the opportunity this market holds for them and their impact will likely be felt in the second and third quarter of the year. Investors waiting for new issues from the technology sector may have to wait until 2018, Braunsteiner suggests.

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 not included in the survey.

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Dean Braunsteiner

National Mining Leader, PwC Canada

Tel: +1 416 869 8713

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