A slow recovery in the market for initial public offerings on the Toronto Stock Exchange in the third quarter has pushed the total new equity raised in Canadian public markets in the first nine months of 2009 to almost $1.5 billion, according to a study released Monday.

The activity in the quarter is a far cry from the heated IPO activity of a few years ago but a significant improvement from the record lows of the past year, the PricewaterhouseCoopers LLP (PwC) survey of IPO markets in Canada reveals.

There were two new issues on the TSX in the third quarter with a total value of $950 million compared with no IPO activity on the senior exchange in the same period of 2008. A total of five IPOs were reported on all of Canada’s equity markets in the third quarter of 2009 for a total value of $952 million, the quarterly PwC survey shows.

The same ‘perfect storm’ of factors that conspired to stall the IPO market in 2008 seems to have started to reverse course and may now be helping to slowly rebuild the IPO market fundamentals, says Ross Sinclair, national leader of PwC’s Income Trust and IPO Services.

“The key ingredients that have been missing in the market — improved liquidity, better pricing and credit spreads, rising valuations and investors regaining confidence — are all contributing to a more positive environment,” says Sinclair. “The $850 million Genworth MI Canada Inc. issue in July may have been the largest issue in the quarter, but its real significance is the confidence it shows in a market that was looking for a turning point.”

Sinclair views the growing activity in equity offerings and debt issues, along with a number of IPOs in development, as welcome indicators of a gradual improvement in the health of the IPO market.

The 15 new issues on all exchanges in first three quarters of 2009 represented a drop in the total number of IPOs, but an improvement in gross value from the results of the same period of 2008. For the first nine months of 2008, a total of 53 new issues were launched on all of Canada’s exchanges for a total value of $680 million. By comparison, 63 IPOs were introduced in the same period of 2007, with proceeds totalling $1.2 billion.

The biggest reduction in activity came on the TSX Venture exchange, where just two new issues were registered in the third quarter of 2009 versus 14 in the same period of 2008.

PwC conducts a quarterly survey of IPO activity on Canada’s equity markets. The PwC survey does not include structured financial product listings in its quarterly reviews because they do not represent new equity raised for operating companies.

IE