After years of dwindling debuts, Canada’s biggest exchange is on track for a revival
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The declining trend in IPOs was a point of concern in certain Canadian financial circles in 2016, as concerns were raised over possible weakness in innovation and economic growth. But things may be turning around as the Toronto Stock Exchange sees an uptick in new listings this year.
With 10 corporate IPOs launched just halfway through 2017, Canadian IPO activity has already exceeded the yearly average over the past five years, according to the Globe and Mail. Citing data from CIBC World Markets, the report said each IPO has raised more than $100m in Canada, raising a total of $3.5bn.
“This notion, or stigma, of companies avoiding going public is rapidly diminishing,” TMX Group CEO Lou Eccleston told the Globe and Mail.
Among the new listings so far this year are Freshii, Canada Goose, Real Matters, Zymeworks, Kinder Morgan, STEP Energy Services, and Source Energy Services. Coming up are Jamieson Wellness and Bento.
“For any sponsor or shareholder who is looking to exit over time, the IPO is a real option and the valuations are still very healthy,” said CIBC Head of Equity Capital Markets Benoit Lauze. He said he is working with a dozen companies – a mixture of tech, infrastructure, consumer, and oil companies 3 who are considering a public debut over the next six to 12 months.
Many entrepreneurs have taken to approaching private investors for early-stage funding, preferring to delay or totally avoid going public. The increasing costs of leading a public company – whether in terms of money, time, or effort – are seen as a significant deterrent.
Last year, only three companies went public. The catalogue of stocks on the exchanges has thinned out further in recent years because of mergers and acquisitions. Since 2008, the number of listings on the TSX has declined by 30%, from 1,232 stocks to just 858 companies by end of May.
But according to Eccleston, the TSX is poised to have its best year in a long time. “There is renewed acknowledgement of the advantages of being a public company,” he said at a recent panel discussion hosted by the CD Howe Institute.
He added that the more junior TSXV exchange has raised $2.9bn this year, doubling its pace compared to last year. Historically, companies on the TSX-V have tended to move up to the TSX, so Eccleston is expecting more names to join the TSX in the coming years.
At the CD Howe event, David Skurka, deputy chair of investment banking at TD Securities, noted that public companies are turning to the stock market for record amounts. Figures from the TSX indicated that companies listed on the exchange raised $58bn last year – the highest in seven years.
Not everyone is celebrating, however. Melinda Park, a securities lawyer at Calgary-based Borden Ladner Gervais LLP, noted that the billions raised last year went to only a handful of companies. Tom Caldwell, chairman of Caldwell Financial, also noted that the pickup comes after an extremely low base and a decline of 90% over the past 10 years.
“It is picking up, but it’s nowhere near as robust as we need to fuel innovation, create jobs, grow the economy,” he said.
For more of Wealth Professional's latest industry news, click here.
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2016 worst year for Canadian IPOs
With 10 corporate IPOs launched just halfway through 2017, Canadian IPO activity has already exceeded the yearly average over the past five years, according to the Globe and Mail. Citing data from CIBC World Markets, the report said each IPO has raised more than $100m in Canada, raising a total of $3.5bn.
“This notion, or stigma, of companies avoiding going public is rapidly diminishing,” TMX Group CEO Lou Eccleston told the Globe and Mail.
Among the new listings so far this year are Freshii, Canada Goose, Real Matters, Zymeworks, Kinder Morgan, STEP Energy Services, and Source Energy Services. Coming up are Jamieson Wellness and Bento.
“For any sponsor or shareholder who is looking to exit over time, the IPO is a real option and the valuations are still very healthy,” said CIBC Head of Equity Capital Markets Benoit Lauze. He said he is working with a dozen companies – a mixture of tech, infrastructure, consumer, and oil companies 3 who are considering a public debut over the next six to 12 months.
Many entrepreneurs have taken to approaching private investors for early-stage funding, preferring to delay or totally avoid going public. The increasing costs of leading a public company – whether in terms of money, time, or effort – are seen as a significant deterrent.
Last year, only three companies went public. The catalogue of stocks on the exchanges has thinned out further in recent years because of mergers and acquisitions. Since 2008, the number of listings on the TSX has declined by 30%, from 1,232 stocks to just 858 companies by end of May.
But according to Eccleston, the TSX is poised to have its best year in a long time. “There is renewed acknowledgement of the advantages of being a public company,” he said at a recent panel discussion hosted by the CD Howe Institute.
He added that the more junior TSXV exchange has raised $2.9bn this year, doubling its pace compared to last year. Historically, companies on the TSX-V have tended to move up to the TSX, so Eccleston is expecting more names to join the TSX in the coming years.
At the CD Howe event, David Skurka, deputy chair of investment banking at TD Securities, noted that public companies are turning to the stock market for record amounts. Figures from the TSX indicated that companies listed on the exchange raised $58bn last year – the highest in seven years.
Not everyone is celebrating, however. Melinda Park, a securities lawyer at Calgary-based Borden Ladner Gervais LLP, noted that the billions raised last year went to only a handful of companies. Tom Caldwell, chairman of Caldwell Financial, also noted that the pickup comes after an extremely low base and a decline of 90% over the past 10 years.
“It is picking up, but it’s nowhere near as robust as we need to fuel innovation, create jobs, grow the economy,” he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Will ETFs take the place of stocks?
2016 worst year for Canadian IPOs
