Although a federal government decision to stop issuing advance tax rulings to companies seeking to convert to income trusts shook investor confidence last September, the income trust activity in the preceding months was able to carry the market to an increase in capital raised over the prior year, according to Accelerating Growth, the third annual report on IPOs released by leading professional services provider Ernst & Young LLP.

IPOs in Canada raised $6.4 billion in 2005, motivated largely by economic factors such as low interest rates and strong commodity prices, says Joe Telebar, partner and strategic growth markets leader for Ernst & Young. “We’ve seen a successful year of IPO activity in Canada that we expect to continue through 2006. By the end of March this year, the total capital raised through IPOs in Canada already exceeded $1.9 billion, of which over 60% represented income trust IPOs. Market sentiment for the sector is positive, showing a high demand for IPOs by companies with solid fundamentals,” he says.

The report, combining data from Ernst & Young and Thomson Financial — with the views of representatives from recent IPOs, investment banks and stock exchanges around the world — reveals that issuers have increasingly diverse strategies and needs, and that the stock exchanges are implementing strategies to differentiate themselves while meeting the needs of issuers and investors.

Highlights of the survey include:

– The oil and gas sector in Canada was the most active in 2005 in terms of number of new offerings and in capital raised.
– Canadian companies completed a total of 65 IPOs in 2005.
– The top five IPOs worldwide were state-owned enterprises in China and France.
– Asia continues to be a hotbed of activity. Towed along by the continuing strength of mainland China and Hong Kong, other economies in the area displayed vigorous IPO activity, notably Malaysia, Taiwan, South Korea, and India.
– The emerging markets of Russia and Eastern Europe accounted for a large portion of IPO activity in 2005. Russian companies raised US$4.9 billion in 11 IPOs last year – more than four times the 2004 figure.