There is a “huge appetite” for initial public offerings (IPOs) in Canada, “especially in key sectors,” McCarthy Tétrault partner Patrick Boucher tells Canadian Lawyer. In an article, author Zena Olijnyk explores what’s fuelling Canada’s booming IPO market, drawing on Patrick’s industry-leading insights. The article explains that “surging equity markets and a blossoming technology sector” are contributing to what is the “biggest first-quarter crop of IPOs by Canadian companies in 15 years.” According to Bloomberg data presented in the article, at least 32 Canadian firms have announced IPOs set to raise a combined $3.26 billion, which is more than 10 times the total in IPO deals at this time last year. Patrick, Co-Head of McCarthy Tétrault’s National Capital Markets Practice, offers his unique perspective.

“Three years ago, we were lucky to see three IPOs come on stream in a year. Now it’s not surprising to see three a week,” Patrick tells Canadian Lawyer.

He adds that “anything relating to technology, or lithium, or clean energy, there’s a huge appetite, a really huge appetite, to bring good companies in interesting sectors to the public market.”

Patrick says that while in recent years, investor interest outpaced the inventory of IPOs to take part in, that has changed. He says that while risks related to COVID-19 may still exist, there is a “level of comfort” with respect to vaccines becoming more widely available and their potential impact on the pandemic. “Now we’re seeing many companies take advantage of this window to raise capital through an IPO.”

Patrick also tells Canadian Lawyer that the IPOs are of different sizes and there is a wide range, “but you’re talking about real deals, with some involving market caps over $1 billion, and many at least with market caps of $100 million.”

Special Purpose Acquisition Corporations (SPACs)

In addition to traditional IPOs, Patrick says that “we’re also seeing an increase in IPOs using Special Purpose Acquisition Corporations (SPACs), often known as ‘blank cheque’ companies.”

He explains that publicly traded SPACs are “essentially shell companies that don’t have business plans of their own but instead look for private companies with a desirable business plan.”

Patrick tells Canadian Lawyer that while they have gone through “waves of popularity” over the years, “SPACS are becoming a popular investment vehicle again” due in part to certain unique features:

  • SPACs may sit around for a few years with no business vehicle until the right one comes along
  • Successful investors (sponsor groups) that have a keen nose for what’s hot often put SPACs together
  • Once those who “came up with a particular SPAC have found their ideal business,” those who put money into the deal can choose whether they want to keep participating or get their capital back

Patrick also says that because “a minimum amount of money is needed by the sponsors to go ahead with the business plan,” there could be a limit on the number of investors that can get their capital back.

Patrick goes on to provide greater insights into the IPO and SPAC landscape, and cites examples of SPACs that McCarthy Tétrault has worked on.