A recent $4.6-billion US capital raise by Enbridge ENB-T, a raft of new Canadian equity capital markets deals, bankers and lawyers say have spurred optimism for a revival in Canadian equity capital markets issuance.
Enbridge's jumbo equity sale to finance a portion of its acquisition of three utility providers from Dominion Energy triggered a two-year increase in Canadian ECM issuance, according to data from Refinitiv.
We're certainly in our team talking about a progressive opening of the market between now and the end of the year, and we're certainly more optimistic going into 2024 in terms of what is achievable, he said.
In 2022, Canada ECM issuance hit a more-than 22-year low of $13-billion, and IPOs in Canada fell to a three-year low in 2022 to $1.6-billion and are at $201.7-million for the first six months of the year, according to Refinitiv data.
However, hope for a revival has been uplifted in recent weeks after a flurry of new large offerings in the United States and Enbridge's deal.
Marketing automation firm Klaviyo, Arm Holdings and Instacart have all debuted to strong initial demand. That has motivated market participants to hope that demand for IPOs, which had been hit hard over the past two years by the pandemic, geopolitical tensions and interest rate hikes, may rebound.
Canada's main stock exchange operator TMX Group has about 1,600 companies in its initial public offering pipeline, with more than half of them technology firms, CEO John McKenzie said in a recent interview.
Although the economy is still unstable, investors are not expecting a rush of supply, with an uncertain Macroeconomic environment still keeping secondary equity markets unstable.
After a strong first-day opening, shares of Klaviyo, Arm and Instacart also tailed off.
The share dropped well below their first-day high, potentially limiting a comeback in Canadian equity capital raisings and IPOs.