Canadian IPOs reach $2.2 billion in 2018, down from $5.1 billion in 2017
PwC Canada’s annual roundup of initial public offerings (IPOs) has revealed a ‘respectable finish’ to 2018 in light of worsening market conditions.
Canadian IPO value fell by more than half in 2018, dwarfed by 2017’s $5.1 billion in new equity. 2018 saw a slow start in the first quarter (approximately $150 million), but was buoyed by a hot second quarter which raised $956 million. The third quarter slowed to $764 million, with activity further declining to $336 million in Q4 amid market headwinds. The fourth quarter saw significantly less new equity raised than Q4 2017’s $1.7 billion.
Global trade tensions, interest rate uncertainty, and the continuing Brexit saga were among the main factors disrupting the IPO market in late 2018 – with little likelihood of reprieve in 2019. Geopolitical and economic uncertainty makes it difficult to value new issues and bring them to market, according to Dean Braunsteiner, PwC Canada’s national IPO leader.
However, Braunsteiner was reticent to call the downturn in activity alarming. "The fourth quarter was pretty respectable when you consider the market volatility in December," he noted. "Unlike 2017 that was skewed by the single giant Kinder Morgan Canada offering, 2018 was reflective of a more normal market in Canada." 2017’s Kinder Morgan Canada IPO raised $1.75 billion at $17 dollars a share – nearly equaling 2018’s total activity.
In 2018, all things cannabis grabbed the headlines, and bud industry IPOs were no exception. More than $491 million was raised for cannabis companies across various exchanges, according to PwC’s report.
Another big theme of the year was the return of junior miners to equity markets. The rebounding mining sector saw a significant number of mining issues, with many utilizing the Canadian Securities Exchange (CSE) instead of the more traditional avenue of the TSX Venture exchange. "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 explained.
The top 10 new issues in 2018 surpassed $100 million, with the $462 million issue of HR software firm Ceridian HCM Holding in Q2 taking the top spot. Second place was taken by personal care company MAV Beauty Brands ($241 million), while third place went to natural gas infrastructure firm AltaGas ($239 million). The top three issues were, therefore, from three different industries – namely software/tech, consumer products, and energy.
"I think that's a testament to the diversity of the Canadian market," commented Braunsteiner.
