A Golden Opportunity For Canadian Issuers


According to a new report titled Stable first quarter opens window for Canadian IPO market by PricewaterhouseCoopers (PwC) Canada, 2019 is shaping up to be an opportune time for new Canadian issuers.

The report states,

“A lot of the volatility at the end of 2018 just didn’t make it into the new year,” [PwC national IPO leader] Braunsteiner says. 

“Concerns over interest rates have subsided, the global trade friction seems to have abated . . .

It’s something of a ‘Goldilocks’ moment for issuers.

Though a bold statement, recent data certainly seems to support a more “stable” financing environment in comparison to that of 2018’s.

Manufacturing Activity Increases In China and U.S.

According to new data gathered by Caixin and Markit Economics, the Caixin / Markit Manufacturing Purchasing Manager’s Index (PMI) rose to 50.8 for March, indicating that manufacturing activity in China is actually increasing—not decreasing—despite warnings of a global economic slowdown. The Caixin PMI beat analyst expectations of 49.9. 

Couple this with the fact that manufacturing activity in the United States is also on the rise, and one could hardly be blamed for thinking that the U.S.-China trade war had ended.

“Overall, with a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-U.S. trade talks, the situation across the manufacturing sector recovered in March,” said Zhong [director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin].

Still, trade talks are no substitute for trade deals, as evidenced by last year’s seemingly eternal NAFTA struggle. Though an agreement between the U.S. and China is said to be imminent, negotiations between Beijing and Washington are expected to continue throughout the week.

TSX Venture Listings Have Fallen Year-Over-Year

Although the beginning of 2019 certainly provided a moment of relief for investors on the TSX Venture, it proved to be a slow start for new listings.

New listings in January 2019 were down 65% in comparison to January 2018. All four of these were capital pool companies.

It wasn’t a pretty picture for next month, either. In February 2019, new listings were down 83% when compared to last year. Amongst these new issuers were five capital pool companies and one mining company.

While listings on the Venture have fallen dramatically in the first quarter of 2019, new listings could experience significant growth in Q2—especially if the global economic slowdown shows further signs of reversal.

Significant Room For Canadian IPO Growth

Considering recent progress in U.S.-Chinese trade relations, 2019 is certainly appearing to be a more stable time for Canadian IPOs than 2018. Although the available Q1 2019 equity financing statistics show a decline in new TSX Venture listings, we expect this to increase as future Canadian issuers become more acclimatized to the potential of a U.S.-Chinese trade agreement. In the meanwhile, junior Canadian markets like the TSX Venture still provide an unparalleled growth opportunity for companies focused on the cannabis value chain.