IPOs ride crest of market recovery

Market watchers, however, warn it would be premature to start celebrating as the recovery has been uneven and not robust enough for mid-sized companies to come to market.

“At the beginning of the year, we suggested the market could rebound to over $4 billion based on hopeful signs of renewed investor confidence,” says Neil Manji, PwC national IPO services leader. “We have now exceeded that mark with three months to spare — which is great news — but the recovery has been clearly uneven.”

The data of the study reveal that the market reached the $4 billion threshold through a handful of large issuances. Manji says a prospering IPO market would feature a number of deals in the $200 million to $300 million range. IPOs of that size are still struggling to come to the market, as evidenced in planned IPOs that were cancelled.

He assures that it isn’t as bad as it seems and that these companies have merely deferred their plans. “Many companies that are looking at an IPO as part of their growth strategy haven’t completely abandoned these plans, they’ve had to postpone them,” he says. “When we see more of those deals, it will be a clear indicator that medium-size companies can access the market again and investor confidence is back.”

A total of 10 new issues on all Canadian exchanges in the third quarter of 2010 contributed $1.41 billion to a total value of $4.3 billion raised so far this year, the survey reported. In the same period of 2009, there were just five new issues on all Canadian exchanges for a total of $952 million.

New issues on the TSX dominated third quarter results this year, with three IPOs on the senior exchange accounting for $1.4 billion in new capital during the period. Two of those issues — MEG Energy Corp. at $700 million and SMART Technologies Inc. at $660 million — represented the majority of the new issuances.

The buoyancy of the market is further reflected in recent trading statistics released by TMX Group for its diversified group of exchanges — Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange and Natural Gas Exchange (NGX).

The Toronto Stock Exchange and TSX Venture Exchange continued to experience increases in trading in September 2010. Volume on TSX increased 34% compared to the previous month, while the number of transactions increased 13%. The TSX Venture Exchange continued to see strong growth as reflected in a 64% rise in volume over the previous month.

Volume was up on Montreal Exchange in September 2010 compared to August 2010, with an increase of 5%, a total of 26% year-over-year increase. Year-to-date figures were also up by over 30% for volume and 23% for open interest compared to the same period in 2009.

In 2010, NGX continues to exceed its 2009 year-to-date trading volume, with a 13% increase in September 2010 over the same period in 2009.

(05/10/10)