Are There Brighter Days Ahead for the Canadian IPO Market?
Over recent times, a significantly larger number of Canadian companies have expressed the want to go public, have filed for a new issuance or have already held their new release. The figures have been compared to a dismal 2016 when only three new firms made their way into the Canadian stock market as a result of a series of disappointing performances in Canada’s economy. Recently, Canada Goose Holdings Inc. has gone public with STEP Energy also filing its S-1 form.
Over the month, there are expectations that real-estate firm Real Matters Inc. will also present terms for its release which is expected to be before the end of this year. The company’s valuation of $750 million means it would attract a significant investor demand. So, what has changed over the recent months that has caused the public offering markets in Canada to drastically improve from last year’s performance? Below, we highlight some of these factors.
- Better Market Conditions
2016 took a toll on Canadian markets as a result of various unexpected decisions. Some of these unlikely outcomes included the Brexit decision as well as the election of Donald Trump as United States President. After suffering from these market volatilities, the business environment is overall more stable than it was last year. As such, IPOs this year have increased as investors seek a prime time to maximize their releases for larger revenues and higher returns. The market conditions were also generally improved by successful releases in the United States, where companies such as Snap Inc. have held successful issuances this year.
During the last financial crisis in 2008, companies raised a total of $682 million from 57 new issuances. After markets had stabilized, the releases increased and raised revenues of $1.8 billion and $5.5 billion in 2009 and 2010 respectively. From trend evaluation, the upsurge from the 2016 crisis could follow the same route.
The National leader of Price Waterhouse Coopers, Dean Braunsteiner, explained, “The IPO market always lags the traditional equity market. Companies considering an IPO are watching that steady upward trend like everyone else. They won’t want to get left behind.”
- New Releases in the tech sector
Over the period of last year, Canadian companies filing to go public were in other industries excluding technology. The increasing use of technology to conduct business means that this sector has higher demand in all workplaces. As such, technology companies are valued at higher prices as a result of their products and services. Companies in the technology sector filing to go public can, therefore, raise higher revenues in the IPO market.
This year, Real Matters Inc. is one such company. The firm provides an online platform that enables real estate agents in Canada to price property, review insurance requirements on their assets, search for specific titles on land and handle their mortgages. In 2015, the company’s revenue grew by 73 percent. Additionally, the firm has already secured funding from investors such as BMO Capital Markets.
Additionally, the offering of Markham, a real estate data company valued at $653 million would boost IPO markets in Canada even further this year.
Things are looking up for Canadian markets so far into 2017’s first quarter.