New low looms for Canadian IPO market, PwC survey shows
"The loss of the market for income trusts last October has had a number of knock-on effects," Sinclair contends. "Not only did a huge segment of the market disappear, it created a feeling of uncertainly among both investors and issuers. There would appear to be a significant perception of a 'policy limbo' as we see new proposals for the tax treatment of trusts proposed against the background of a possible federal election. In a market with so much uncertainty, everyone is treading carefully."
TORONTO, Oct. 2 /CNW/ - Barring a surge in activity in the final quarter of the year, the 2007 Canadian market for initial public offerings appears headed for its lowest year in a decade, a survey by PricewaterhouseCoopers (PwC) reveals.
The third quarter of 2007 saw just 22 of new issues on Canadian exchanges for a total value of $337 million, the survey shows. The trickle of new issues brings the total number of new issues to 63 for the first three quarters of the year. The value of new issues during the period reached $1.2 billion.
By comparison, the third quarter of 2006 saw 33 new issues on Canadian exchanges for a value of $650 million. In the first nine months of 2006, therewere 95 IPOs on Canadian exchanges with a value of $4.7 billion.
"At the current rate of activity, it is unlikely we will even reach the ten-year low-water mark, set in the aftermath of the collapse of tech stocks in 2001," observes Ross Sinclair, national leader for PwC's IPO and income trust services. Just 46 new issues with a total value of $2.1 billion were registered in 2001, Sinclair says. "We will need almost $1 billion of activity in the fourth quarter just to match the 2001 results."
Just four new issues made it to the TSX in the third quarter of 2007. The total value of IPOs on the TSX during the quarter was $255 million. The largest third quarter IPO on the TSX was the $131 million issue by Lockerbie & Hole Inc.
The TSX Venture exchange continued to fair much better, recording 15 new issues in the third quarter for a total of $79 million for the quarter. Sinclair credits high metal and commodity prices for the continued strength of new mining issues on the Venture exchange.
A confluence of events has created "a tepid and fragile IPO market environment" in Canada, Sinclair says. "The loss of the market for income trusts last October has had a number of knock-on effects," he contends. "Not only did a huge segment of the market disappear, it created a feeling of uncertainly among both investors and issuers. There would appear to be a significant perception of a 'policy limbo' as we see new proposals for the tax treatment of trusts proposed against the background of a possible federal election. In a market with so much uncertainty, everyone is treading carefully."
The market for new equity issues tumbled in the last quarter of 2006 following the announcement by the federal government of a new policy on the taxation of income trusts. There were 116 new issues with a value of $5.8 billion in all of 2006.
Survey of Canadian IPO Capital Markets January 2007 — September 2007 - PWC
Related:
IPO markets slow to a crawl - CBC
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