IPOs pick up steam

The resurgence in the Canadian market for initial public offerings (IPOs) that began in the third quarter carried over into the final days of 2013 to lift the total market for new equity to $2.7 billion for the year, the quarterly PwC survey of Canadian IPO markets reveals.

Read: 2013’s lessons for mutual fund investors

The year finished with four new issues on the TSX in the final quarter with a value of $577 million. The TSX Venture exchange contributed two new issues with a value of $5.6 million to bring the total for the quarter to six IPOs worth $582.6 million on Canada’s two major exchanges.

The strong final quarter still couldn’t match the last quarter of 2012 when a surge in activity generated 23 new issues valued at $1.3 billion, including nine IPOs on the TSX with total proceeds of $1.2 billion. However, the 30 IPOs on all Canadian exchanges in 2013 generated $2.7 billion, an increase in total value compared to 62 new issues that garnered $1.8 billion during all of 2012.

During all of 2013 there were 18 IPOs on the TSX with a value of $2.7 billion vs. the 12 IPOs ($1.7 billion) in 2012.

The diversity of sectors bringing new issues to the market in the final two quarters was the pleasant surprise of the year and a reason for cautious optimism for 2014, says Dean Braunsteiner, PwC national IPO leader.

“Real estate continued its strong run for the year, helped out by energy and manufacturing; and an issue from a technology company in the final quarter suggests that sector could yet find its feet. That kind of broad support is encouraging.”

The market achieved a solid year without the support of the mining sector, Braunsteiner adds. “Miners just couldn’t get much traction in 2013. The…sector is the dark horse of 2014.”

Read: Credit relief for miners expected in 2014

The largest new equity issue of 2013 was the $400 million IPO of Choice Properties Real Estate Investment Trust in the third quarter followed by CT Real Estate Investment Trust at $263 million in the fourth quarter and BRP Inc. at $262 million in the second quarter.

A variety of factors make next year hard to predict, Braunsteiner concedes. Retail investors continue to seek yield and security, he points out, and new issues need to align with that reality. But a growing optimism from the US with the Federal Reserve’s tapering in the wind, and the market fundamentals showing signs of improvement, suggest reasons for optimism in Canada.

On the other hand, commodity prices will still be a factor, says Braunsteiner. As well, the current pipeline of new equity issues here has little inventory — something that might change if companies that pulled back IPOs in 2013 reconsider in the glow of a stronger market in the new year.

Read: Beware complex REIT IPOs

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.