Originally from our sister publication, Advisor.ca.
The Canadian IPO market is struggling for traction, after having the weakest quarter in recent history, and the outlook for the balance of 2012 remains uncertain.
Without a single IPO on the TSX, the total new capital raised on Canadian exchanges struggled to top $20 million from 13 new issues in the first quarter of 2012, according to a survey published by PwC.
It is the third lowest total for any quarter in the past decade, with only the fourth quarter of 2008 ($2 million) and the first quarter of 2009 ($2.5 million) having been lower.
“The first quarter 2012 results were an extension of the low levels of activity in the final quarter of 2011 when markets were weighed down by the European debt crisis and extreme market volatility,” says Dean Braunsteiner, PwC national IPO services leader.
A single $25 million issue on the TSX in the fourth quarter and a reduction in activity on the TSX Venture exchange generated just $52 million from 10 new issues on all Canadian exchanges in the final three months of 2011.
Braunsteiner adds, “The much hoped-for resolution of the debt crisis in Greece came too late to help the IPO market in the first quarter, and concerns over slowing growth in China have troubled commodity markets. It’s not surprising the first quarter of 2012 looked a lot like the last quarter of 2011.”
First quarter 2012 IPO results were 10% that of the same period of 2011, when 13 new issues, including two on the TSX, totaled more than $198 million.
The resolution of the crisis in Greece would normally help the market regain optimism and dampen volatility, but predicting the IPO market for the balance of the year isn’t any easier, according to Braunsteiner.
“There is still a great deal of corporate activity in areas like mergers and acquisitions, and some of that is taking the place of IPO activity,” Braunsteiner explains.
Large companies are now growing by acquiring new business, snapping up some private companies that might have been candidates for an IPO in another environment.
The annual PwC global mining M&A report revealed that 2011 was the second busiest year of M&A activity in history; and it is anticipated 2012 will be another record year of mining M&A activity, with a variety of financial and vertical buyers.
Despite the fact that the Canadian IPO market is usually resource driven, Braunsteiner says he will be watching the technology sector closely.
“The coming Facebook IPO is bound to ignite interest in technology plays in Canada.”