Canadian IPO market 'slow and steady,' reaches $1.1 billion in first half of 2018

25 July 2018 Consulting.ca

A recent quarterly survey found that initial public offering market in Canada reached a value of $956 million in the second quarter and $1.1 billion in the first half of 2018. The performance is about two-thirds less than the amount raised in the first half of 2017, which was buoyed by the massive Kinder Morgan Canada IPO.

PwC Canada has been conducting its survey of the Canadian IPO market for more than 15 years. The reports are released quarterly, and give valuable info and perspective to the corporate sector, investors, and media. The firm recently issued its Canadian IPO survey for the second quarter.

PwC reports that the Canadian IPO market reached a value of $1.1 billion in the first half of 2018 – performance that the Big Four accounting and consulting firm characterized as ‘slow and steady.’ Eleven new IPOs in the second quarter raised $956 million – including four big deals on the TSX that raised $948 million.

The largest IPO of the second quarter was the $462 million dual listing of Ceridian HCM Holdings – an HR software and services firm – on the TSX and New York Stock Exchange.

Nine new issues on the Canadian Securities Exchange generated $10 million in 2018’s first half, while the Venture saw five issues worth $4 million in the first half. PwC relates that successful issues from junior miners appeared on the above exchanges, while gold miner Steppe Gold completed a $25 million IPO on the TSX in May.Canadian IPO market ‘slow and steady,’ reaches $1.1 billion in first half of 2018The total $1.1 billion raised in first half 2018 was about two-thirds less than the amount raised by IPOs in the first half of 2017 – which generated $2.9 billion. "Comparing it with last year is a little unfair given that the huge Kinder Morgan issue arrived in the same period of 2017,” commented Dean Braunsteiner , PwC Canada national IPO leader. Last year the Kinder Morgan Canada IPO raised a massive $1.75 billion at $17 dollars a share.

As such, this year’s numbers lack a huge outlier of an IPO, making the amount raised more modest and closer to ‘business-as-usual.’ "It was a slow and steady quarter fairly typical of a traditional IPO market," Braunsteiner added.

The PwC report says, however, that predicting the second half of 2019 will be challenging. “Many companies today are on a dual track: they start down the road toward IPO but keep the door open to a private purchase or funding option,” remarked Braunsteiner. “With a great deal of uncertainty surrounding NAFTA and trade in general, they want the flexibility of another option.”

This has been particularly apparent in the cannabis sector, as companies that appear headed for an IPO are snapped up by a competitor before reaching the stock exchange.

In another recent PwC insight report, the firm found that rebounding commodity prices have boosted Canadian mining firms’ exploration endeavours by 31%. Top firms grew their spending to $600 billion, while also focusing on other areas like digital transformation and safety.

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Federal budget leaves mid-market firms’ concerns mostly unanswered

22 March 2019 Consulting.ca

Middle-market-focused accounting and consulting firm RSM Canada was left underwhelmed by the federal budget, which lacked measures to reduce tax and regulatory complexity.

The federal government doubled down on spending in this year’s budget, with Finance Minister Bill Morneau unrepentant about a broken promise from the last election campaign to balance the books by 2019. “We’re making investments in Canadians’ future. We’re doing it in a fiscally responsible way,” he said. The deficit is slated to grow to $16.8 billion in the next fiscal year.

The generous election year budget focused on making investments to help middle-class Canadians – including spending to support millennial homebuyers, skills training for workers, and financial support for seniors. Fiscal conservatives and critics of the Liberal Party view this sort of chicken-in-every-pot spending as fiscally irresponsible – a move that mortgages the country’s future to buy votes in an upcoming election. Liberals will counter that they are investing in the country's future.

The budget outlined $22.8 billion in new spending over the next six years. On the home-buying front, first-time buyers will be able to finance part of the purchase through a shared equity mortgage with Canada Mortgage and Housing Corp, lowering monthly payments. The amount that people can withdraw from their Registered Retirement Savings Plan for a home purchase has also been raised to $35,000, from the previous limit of $25,000.

Federal budget leaves mid-market firms' concerns mostly unanswered

Workers from the ages of 25-64 can now tap into a $250-per-year tax credit for skills training costs, up to a lifetime value of $5,000. The budget also plans to create 84,000 new student work placements over the next five years, while cutting interest rates on student loans.

For seniors, the budget promises to reduce clawback on the guaranteed income supplement for seniors who are still working. It also tags $2 billion for local infrastructure spending, $1.4 billion for social services for indigenous children, and up to $6 billion to bring high-speed internet to all Canadian homes and businesses by 2030.

Embattled industries were also singled out for support, with up to $3.9 billion pledged to dairy, poultry, and egg farmers now competing with international suppliers, as well as $251 million for the forestry industry, and $100 million for oil and gas.

You can’t always get what you want

In a release preceding the budget, accounting and consulting firm RSM Canada was hoping for the introduction of a number of business-friendly measures to help Canadian mid-market businesses better compete on an evolving international stage. The consultancy principally wanted a simpler regulatory and tax framework and a commitment to fiscal responsibility. It doesn’t seem like those hopes were realized in this year’s federal budget.

"Canadian middle-market companies were hoping that Budget 2019 would have meaningful measures to support growth and global competitiveness," Maria Severino, national tax leader at RSM Canada, said. "Although finance included some positive, targeted tax measures to support Canadian businesses, it deferred introducing any broad-based changes that could enhance competitiveness and reduce uncertainty."

As mentioned, the budget was silent on introducing broad-based tax measures that would relieve global economic pressure arising from factors such as the US’ tax reforms and the USMCA. The 2019 budget also didn’t introduce measures to lower personal and corporate tax rates, nor did it announce measures to reduce tax code complexity.

RSM did note some positives in the budget announcement. The consultancy was in favour of the new Canada Tax Credit, noting that it would “help strengthen workforce skills and provide a deeper pool of talent to Canadian companies.” RSM also lauded the elimination of an income test on companies performing scientific research and experimental development (SRED), which had previosuly restricted access to the 35% refundable tax credit. “The changes to the SRED program will allow more middle market businesses to access tax credits for innovation activities,” a release from the firm stated.

Other measures the consulting firm highlighted in the budget were the government’s increased funding and enforcement action toward tax noncompliance for the digital economy, cryptocurrency, non-residents, and high-net-worth individuals, as well as an intention to place a $200,000 annual cap on employee stock option grants (with the exception of start-ups). 

Related: RSM Canada launches alliance network