Vancouver-based Aritzia Inc.’s $400-million initial public offering (IPO) was the only source of optimism in what was otherwise a lacklustre third quarter (Q3) in new issues, according to a survey published by PricewaterhouseCoopers LLP (PwC) on Monday.
Aritzia, a clothing retailer, made its offering of subordinate voting shares official on Sept. 26, just days away from the end of Q3 on Sept. 30. Prior to Aritzia, there was only one single issue of $690,000 on the Canadian Securities Exchange in Q3. Overall, 2016 was shaping up to be the worst year on record for IPOs, with less than $2 million in new issues, according to PwC’s quarterly IPO report.
“The factors weighing on the IPO market are well known: global economic uncertainty, persistent weak performance in China, negative interest rates and a troubling outlook for European banks are daily news,” says Dean Braunsteiner, national IPO leader at PwC in Canada, in a statement. “Add to that the uncertainty over the impact of the U.S. election and investors are understandably cautious.”
However, there’s room for optimism, says Braunsteiner, who notes the popularity of new special-purpose investment companies and flow-through limited partnerships in raising capital for companies.
The secondary market is also showing buoyancy, Braunsteiner adds: “Canadian mining companies are quietly making a comeback, with some of their share prices up substantially since January. Mining companies in production or in late-stage development have seen the benefit, with improved access to capital via secondary markets. That buoyancy hasn’t reached the junior miners yet, but it’s a hopeful sign.”
Aritzia’s IPO is a reminder that there’s a “real investor appetite for quality issues” and the possible oft-debated issue of a large Canadian utility, such as Toronto Hydro Corp., would have an immediate and positive impact on the entire Canadian market, he adds.
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