IPO market recovery could be a bumpy ride, PwC survey shows

TORONTO, July 5 /CNW/ - The recovery in the market for initial public offerings in Canada that began in the first quarter of the year took flight in the second quarter, but it hasn't been a smooth ride, a PricewaterhouseCoopers (PwC) survey of IPO activity on Canadian exchanges has shown.

Volatility in the equity markets returned in the second quarter and held new issues to a value of $2.4 billion on all Canadian exchanges during the period, up significantly from the $464.7 million in the first quarter of 2010 but short of what could have been a banner quarter when a number of potential new issues were either delayed or withdrawn. The second quarter's results were far ahead of the $514.6 million from the same period of 2009, the survey revealed.

There were a total of 16 new issues on all exchanges in the second quarter vs. seven in the comparable period of 2009. There were also 16 IPOs in the first three months of 2010.

IPO activity on the TSX in the second quarter of 2010 registered eight new issues with a value of approximately $2.3 billion, compared to the single IPO worth $500 million in the same quarter of 2009. The first quarter of 2010 saw four IPOs on the TSX, generating $442.7 million in new equity.

The uneven progress of the Canadian IPO market is typical of an early stage recovery, and the recent volatility has compounded the situation, says Neil Manji, PwC national IPO services leader.

"The IPO market was off to a great start in the first quarter, but like the rest of the equity markets, IPOs have been sideswiped by a return of volatility in the second quarter," Manji says. "The recent volatility combined with concerns about worldwide economic growth and the decline in equity markets in the last quarter gave new issuers a reason to pause and catch their breath. This kind of bumpy ride is to be expected in the early stages of a recovery, but makes it difficult for both investors and issuers."

The largest issue was the $1.35 billion placement by Athabasca Oil Sands Corp. in the early days of the second quarter of 2010, the survey showed. Among the other issues that were successfully placed in the quarter were real estate and other businesses with stable cash flows, a sign that the market is open to investments with more sustainable and predictable returns, Manji contends.

"The market for IPOs isn't the same across all sectors. Athabasca was obviously the largest placement, but we saw strong IPO activity in the real estate and resource sectors. The activity to date and what we see in the pipeline suggest that the recovery will be more broadly based when some of the current volatility subsides," Manji says.

"Year to date, IPO activity has generated approximately $2.9 billion in new issues, surpassing the annual total from 2009 of $1.8 billion. Based on the IPOs in the first half of the year and what we see ahead, we continue to believe an IPO market of $4 billion is possible for Canada this year," he adds.

A total of 12 new issues appeared on the TSX in the first half of 2010, the PwC survey reported, compared to one during the same period of 2009. Total value of new equity issues on Canada's senior exchange equaled $2.7 billion for the first six months of this year, up from the $500.2 million for the first half of 2009.

The survey reported a total value of $2.9 billion from 32 new issues on all exchanges for the first half of 2010. Just 10 new issues on all exchanges accounted for $517.1 million in the first half of 2009.

PricewaterhouseCoopers has conducted its survey of the IPO market in Canada for more than 10 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 survey, investment vehicles such as structured products are not considered IPOs because they do not represent new equity raised for operating companies.

For more information, please visit www.pwc.com/ca/iposurveys

To download the PwC publication The Canadian IPO - Market Decade in Review 2000-2009 visit www.pwc.com/ca/decadeinreview

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For further information: David Rowney, PricewaterhouseCoopers, 416-365-8858, [email protected]; Susan MacDonald, MacDonald & Co., 613-966-4969, [email protected]