A report on first-quarter initial public offerings on the Toronto Stock Exchange suggests a logjam of potential listings that built up during a lean 2009 will continue to flow through the Canadian market in the year ahead.
Professional services firm PricewaterhouseCoopers noted in the report that the four IPOs on the TSX for the first quarter equalled the total for all of last year. The activity on the senior exchange raised a total of $442.7 million, the bulk of the overall $464.6 million raised on all Canadian exchanges in the first quarter. Twelve IPOs on the TSX Venture Exchange and other exchanges accounted for the remaining $21.9 million, according to PwC.
Leisureworld Senior Care Corp.’s $190-million issue was the largest IPO of the quarter, the firm noted. Mukuba Resources Ltd.’s $8-million issue was the largest over the period for the TSX Venture. PwC’s national IPO services leader Neil Manji said in the report that investors have shown strong interest in the energy, mining, real estate, and services sectors.
“Last year was a very difficult year in the capital markets for IPOs, as investors recovered from the shocks of late 2008 and early 2009,” says Davies Ward Phillips & Vineberg LLP Toronto partner Shawn McReynolds. “We’re seeing more stability in the economy generally, and I think the IPO market is a reflection of more stability and optimism in the market.”
The upward trend may prompt some private companies to ponder going public. But McReynolds notes it’s nearly impossible to know just how an IPO will turn out. Companies planning to file must start preparing several months before marketing their securities.
“You never know, when you’re starting the process, what the market is going to be like when you finish it,” he says. “That’s always a challenge for owners of a company looking at an IPO.”
Meanwhile, if McReynolds’ law practice is any indication, the IPO market certainly seems poised for a sustained recovery this year. He’s already worked on one listing so far, and is working on another that is expected to file in the second quarter. It seems companies that held off during last year’s economic turmoil are ready to take the plunge.
The bottom line, he notes, is that people are eager to list if they feel they can receive fair value for their business.
“We’ve certainly been around to see a number of companies in the last two or three months who are considering going public later this year or in the early part of next year,” he says.
That’s a sharp contrast from last year, when he can’t remember working on a single IPO.
“If the markets hold up, I think we’ll see more volume in the second quarter, and I think we’ll see more volume in the fall. And people who are thinking about going public in the fall are probably starting to get themselves organized right about now,” says McReynolds.
Georges Dubé, vice chairman of Fasken Martineau DuMoulin LLP’s business law practice in Ontario, sympathizes with in-house counsel at companies pondering an IPO as the market takes a positive turn. He notes how stressful the process can be — particularly for those who have never navigated a filing. That’s why it’s vital, he says, to find the right outside counsel to lean on.
“It’s about relationships and it’s about completing a successful transaction in as painless a manner as possible,” he says. “The process detracts from management doing their day-to-day jobs . . . so internal counsel has got to have a good relationship with a securities lawyer in the private sector.”
Dubé also advises in-house counsel to ensure that management meet with as many investment bankers as possible before retaining a firm.
Again, he says, the IPO process is all about fit and execution, so it’s vital to feel comfortable with the advisers steering it forward.