A single initial public offering (IPO) on the Toronto Stock Exchange and a modest $327 million in total proceeds in the first quarter of 2019 made for a stable start to the year and opens a window for new issues later this year, a new report on the Canadian IPO market from PwC suggests.
The $240 million Lightspeed POS Inc. issue on the TSX was the largest of eight issues on all Canadian exchanges in the first quarter, the PwC review showed. There were five IPOs on the CSE and two on the TSX Venture in the quarter. By comparison, there were nine new issues on all Canadian exchanges in the first three months of 2018 for a value of $157 million, a quarter rocked by market volatility.
That lack of volatility in the first quarter of 2019 opens the window for Canadian issuers seeking a stable market with predictable valuations, says Dean Braunsteiner, PwC national IPO leader.
“A lot of the volatility at the end of 2018 just didn’t make it into the new year,” Braunsteiner says. “Concerns over interest rates have subsided, the global trade friction seems to have abated, Brexit has been priced-in and we’re not close enough to the U.S. election for that to be a factor yet. It’s something of a ‘Goldilocks’ moment for issuers.”
The potential for a slowing economy may still influence the decision of consumer products companies to go public, Braunsteiner adds.
The Lightspeed issue is the first of the tech companies that have long been expected to enter public markets, Braunsteiner says. The private equity owners of a number of tech companies have been expected to exit their positions and the IPO route is one traditional option.
As the tech sector potentially ascends, the cannabis sector is cooling off, Braunsteiner says. “That should leave a healthy level of capital that had been focussed on cannabis looking for other opportunities.,” he concludes. Two new issues from the cannabis sector made it to the CSE during the first quarter.
PwC has conducted its review 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 report, investment vehicles such as structured products are not included in overall 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 also not included in the summary.
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SOURCE PwC (PricewaterhouseCoopers)