The market for initial public offerings paused for a breather in the first quarter of 2018 as issuers and investors assessed the implications of interest rate hikes, recent U.S. tax changes, market volatility and threats to world trade. But if the pipeline of new issues is any indication, the market won’t stay quiet for long.

The list of potential new issues stands in stark contrast to a quarter that saw just nine new issues completed on all exchanges for a value of $157 million. By comparison, total value of IPOs in the first quarter of 2017 reached  $571 million from six new equity issues across all Canadian exchanges — the second-best initial quarter result in the past decade, the PwC survey reported.

The first quarter of 2018 saw one issue completed on the TSX with a total value of $150 million. The CSE contributed three issues and the Venture added five with a total value of $7 million.

“A slow first quarter is really pretty normal,” explains Dean Braunsteiner, PwC national IPO leader. “With the rush of activity at the end of last year, it isn’t surprising to see the market taking stock — particularly in light of the extreme volatility we saw in the quarter. I also believe the market is still assessing the implications of the new U.S. tax regime. The outlook for the NAFTA negotiations and U.S. trade sanctions, and interest rates are all giving issuers lots to consider.”

The sole issue on TSX in the first quarter was the IPO of Pinnacle Renewable Holdings Inc.  Pinnacle is an industrial wood pellet manufacturer and distributor and the first issue from the energy sector this year.

The pipeline of new issues points to an uptick in activity for the balance of the year, Braunsteiner says, if the market can see beyond all of the short-term disruption. “There are some interesting issues in the wings,” he says.

What has carried over from last year is the slow improvement in activity in the mining sector where seven new issues were registered on the CSE and Venture Exchange, Braunsteiner says.

Although the PwC survey does not count reverse take-overs by private firms as IPOs, Braunsteiner has watched a number of companies take that route to public ownership recently. “Some companies perceive it as an easier, less expensive route to going public. That’s debatable. But while it isn’t a significant number overall, reverse take-overs represent a channel that bears watching, particularly as new entrants in the busy cannabis sector jockey for a place in public markets,” says Braunsteiner. There were nearly a dozen  reverse take-overs that appeared on Canadian exchanges in the first quarter.

PwC has conducted its survey of the IPO market in Canada for more than 15 years. The reports are issued on a quarterly basis to provide information to the corporate sector, investors, the media and others that will help them put the market into better perspective. For the purposes of the survey, investment vehicles such as structured products are not included in overall survey results because they do not represent new equity raised for operating companies. New issues from companies that are created from the reverse takeover of an existing public company are also not included in the survey.

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