Andrew Masterman, CEO of BrightView Holdings, rings a ceremonial bell to begin trading of his company’s stock during its IPO on the floor of the New York Stock Exchange on June 28, 2018.BRENDAN MCDERMID/Reuters
Rising energy prices are expected to breathe some life into the market for initial public offerings, after political uncertainty weighed on executives and made for a sluggish start to the year.
Only seven initial public offerings came to market in the first six months of 2018, raising a total of $958.5-million, according to quarterly data from Thomson Reuters. That compares with 12 IPOs, raising a combined $3.6-billion, during the first half of 2017.
The biggest deal so far was a $241.7-million raise by MAV Beauty Brands Inc., the data show.
“It’s been a very slow year,” said Peter Miller, head of Canadian equity capital-markets at BMO Nesbitt Burns.
Many Canadian executives have been reluctant to take on risky capital projects or make big acquisitions, Mr. Miller said.
"Uncertainty about trade and NAFTA seems to be weighing on the minds of Canadian executives, and as a result there’s been a long pause as far as issue activity,” Mr. Miller said.
Over all, equity issuance totalled $16.9-billion – a 36-per-cent drop compared with the first half of 2017. BMO was the top underwriter of stock sales, followed by TD Securities and CIBC World Markets.
Sante Corona, head of equity capital markets at TD Securities, blames the decline on decreased activity by the energy sector. Last year, energy companies – including oil and gas producers, pipelines and utilities – were responsible for $13-billion of issuance in the first half of the year, Mr. Corona said. This year, they have only raised $1-billion so far.
But higher oil prices – the U.S. crude benchmark cracked US$75 a barrel on Monday for the first time since November, 2014 – provide some optimism for the remainder of the year.
“We are having dialogue with numerous companies in the energy sector that, if things continue to go well, could come to market,” Mr. Miller said.
In the absence of energy and mining deals, Mr. Miller said the cannabis sector has been “a bit of a saving grace” for BMO, which helped Canopy Growth Corp. sell $600-million worth of convertible debentures last month.
Kirby Gavelin, head of equity capital markets at RBC Dominion Securities, said he expects more publicly traded companies to tap the public markets to finance acquisitions in the latter half of the year. He also anticipates “meaningful activity” in the IPO market, across a broader range of sectors.
“So we’re pretty constructive as we look forward for the next six months of 2018,” Mr. Gavelin said.