One of the poorest quarters for initial public offering (IPO) activity in recent history has left the outlook for the rest of 2012 uncertain, according to a PwC survey.
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.
This is the third-lowest total for any quarter in the past decade. Only the fourth quarter of 2008 ($2 million) and the first quarter of 2009 ($2.5 million) had lower total proceeds.
Dean Braunsteiner, PwC national IPO services leader, said, “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.”
According to PwC, 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.
First-quarter 2012 IPO results were 10% of the same period of 2011, when 13 new issues, including two on the TSX, generated more than $198 million.
The resolution of the crisis in Greece would normally help the market regain optimism and dampen volatility, Braunsteiner said, but predicting the IPO market for the balance of the year isn’t any easier.
“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,” he said.
“Larger public companies with ample cash are now in a position to grow through acquisition, and some of the companies that are being acquired might have been candidates for an IPO in another environment.”
Technology is one sector Braunsteiner will be watching carefully.
“Canada has traditionally relied on natural resource companies to feed the IPO market and that was the case in 2011. But the coming Facebook IPO is bound to ignite interest in technology plays in Canada that have been ignored until recently.”
