Total funds raised on Canadian equity markets hit more than $2 billion in Q3, finds a PwC survey, but a depressed mining sector and questions about interest rates make the balance of the year difficult to predict.
Seven new offerings on all Canadian exchanges with a total value of $802 million in Q3 out-paced the $271 million raised from seven IPOs in the same period of 2012. Five IPOs on the TSX raised $798 million during the third quarter, in comparison to a single new issue for $212 million in the same period of 2012.
The largest new issue of the quarter was the $400 million Choice Properties REIT from Loblaws. Added to the $294 million in REIT issues from the second quarter, this offering extended the real estate sector’s star performance in 2013, notes Dean Braunsteiner, PwC national IPO leader.
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But questions about when — and by how much — interest rates will increase have made the future of the popular REIT vehicles difficult to predict.
“IPOs from a diverse list of sectors like energy, banking, transportation and technology suggests broad interest in the Canadian IPO market,” says Braunsteiner. “But lacking a real engine to drive the market, the last quarter of 2013 and the first part of 2014 will be hard to predict.”
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The REIT market is very sensitive to interest rates, he explains, and even though at least one more major REIT issue is in the pipeline, an increase in rates leaves the long-term future of the sector as a question mark. The mining sector, long the engine of the Canadian IPO market, is still in the doldrums and shows no signs of recovery in the short term.
The $2 billion in new equity raised from 23 new issues in the first three quarters of 2013 makes the year so far a modest success, adds Braunsteiner, ahead of the $491 million from 39 IPOs in the same period of 2012.