Canadian IPO market reached 'respectable' finish in 2018: PwC

The turbulence that plagued markets last year was offset with a greater diversity of new issues

Canadian IPO market reached 'respectable' finish in 2018: PwC

Last year’s $2.2 billion total for Canadian initial public offerings was less than half of the $5.7 billion seen in 2017, but was nonetheless a “respectable” finish considering the volatility that plagued the market last year.

That was one major finding from PwC Canada’s annual survey of IPOs. The fourth quarter of 2018 brought 22 new issues on three Canadian exchanges, which together delivered $336 million in new equity for the period — a major decline from the $1.7 billion raised across 12 IPOs during the final quarter of 2017. Throughout last year, there were 54 new equity issues on four exchanges, as opposed to 37 in all of 2017.

“The fourth quarter was pretty respectable when you consider the market volatility in December,” said Dean Braunsteiner, national IPO leader at PwC Canada. “Unlike 2017 that was skewed by the single giant Kinder Morgan Canada offering, 2018 was reflective of a more normal market in Canada.”

The top 10 new issues in 2018 raised at least $100 million each, PwC Canada found in its survey. The largest was the $462 million Ceridian HCM Holding issue of the second quarter, followed by MAV Beauty Brands ($241 million) and AltaGas ($239 million). Two Canadian-domiciled firms also got listed on the NASDAQ exchange in 2018, the survey showed.

The TSX, Canada’s senior exchange, accounted for $1.8 billion of the total IPO capital raised last year. It saw two new issues that raised a cumulative total of $254 million in the fourth quarter; over the same period, the CSE contributed 14 new issues while the TSX Venture Exchange had six.

Braunsteiner noted that while pot firms grabbed the biggest headlines, 2018 was also notable because of the surge of activity on the CSE and the return of junior miners to the equity markets. The CSE saw 28 IPOs last year, a significant number of which were mining issues — though he said that it would be premature to conclude that the CSE has supplanted the TSX Venture Exchange as the place for new miners to debut.

“The cost-efficient route to public ownership via the CSE certainly appealed to junior miners and other start-up companies that were focused on maximizing the new equity coming their way,” Braunsteiner said.

The CSE was also a popular venue for new cannabis companies. Considering all the exchanges with new issues last year, cannabis companies raised more than $491 million in IPOs in 2018, the survey found.

Looking ahead into 2019, Braunsteiner admitted that the view is less clear. Disruptive factors such as interest-rate uncertainty, the ongoing Brexit saga, and global trade tensions are expected to continue well into the year, which will likely confound efforts to value new issues and bring them to market.

Whether other pot-sector players will come out with IPOs before the industry starts to consolidate is another open question, he added.


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