A trickle of new issues in the fourth quarter saved 2016 from being a complete washout for initial public offerings on Canada’s largest equity exchange but couldn’t redeem the year as the worst in the nearly 20-year history of the PwC survey of the IPO market.
The $400 million Aritzia Inc. IPO in October was one of just three new issues on the TSX during the entire year and one of only eight new issues on all exchanges in Canada during 2016, the annual PwC survey revealed. Two other small issues on the TSX in the final months of the year brought the quarterly and annual tally for Canada’s senior exchange to $464 million.
Five issues on the CSE totaling $2.6 million brought the 2016 full-year total on all Canadian exchanges to $466 million. There were 22 issues with a value of more than$3.9 billion on all exchanges in 2015, including 13 IPOs on the TSX worth $3.9 billion.
2016 was the worst year for IPOs in the history of the PwC survey, plummeting past the previous low-water mark set during the financial crisis of 2008. Just 57 new issues struggled to reach Canada’s equity markets that year, with a mere 10 registered on the TSX. There were no new IPOs on the TSX in the final six months of 2008. The value of all issues on Canadian markets in 2008 was $682 million with $547 million on the TSX.
The PwC IPO survey has followed Canadian equity markets since 1998.
There is no shortage of explanations for the poor 2016 IPO market performance, says Dean Braunsteiner, national IPO leader at PwC in Canada. The hangover from the European debt crisis, the shock of the Brexit vote in the U.K. and the U.S. presidential election campaign all contributed to the uncertainty that plagued the IPO market in 2016 — not just in Canada but in other developed global markets. But with those events behind us, Braunsteiner sees some positives on the horizon.
“The IPO market always lags the traditional equity market,” explains Braunsteiner, “and markets in Canada and the U.S. have marched higher since the U.S. election. Companies considering an IPO are watching that steady upward trend like everyone else. They won’t want to get left behind.” Braunsteiner points to the tech sector as one possible starting point for an IPO revival.
Braunsteiner also points to the relative strength of the market for secondary equity issues as evidence that investors welcome new opportunities. “Investor interest is there,” says Braunsteiner.
The market for vehicles such as structured financial products and capital pool companies raised $794 million from 45 issues during 2016. Special purpose acquisition companies, which were a factor in the Canadian IPO market in 2015, failed to make an impression on the market in 2016 although a large IPO is scheduled for 2017.
Braunsteiner refuses to be pessimistic about 2017. “The year after the previous market low of 2008, the IPO market in Canada bounced back to $1.8 billion in 2009 and $5.5 billion a year after that,” he says. “It’s sometimes darkest before the dawn.”
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.