Global Turmoil Sends Canadian Stock Sales to Lowest in 16 Years

(Bloomberg) -- Canada had its slowest start for stock sales in 16 years, as trade woes and global uncertainty kept companies on the sidelines.

Companies raised about C$12 billion ($9.2 billion) in Canadian equity and equity-linked financings in the first six months, 39% less than a year ago and the slowest first half since 2003, according to data compiled by Bloomberg. It was also the slowest of any six-month period since 2003, except the C$10.4 billion raised in the back half of last year.

Global trade tensions, including the fact that the free trade agreement between Canada, the U.S. and Mexico remains unratified, are creating uncertainties for businesses, according to Dean Braunsteiner, national IPO leader for consulting firm PwC Canada.

“Most Canadian companies are exporters, so to the extent that there's risk of those economies slowing or tariffs being introduced, that's certainly going to hurt the Canadian economy,” Braunsteiner said Wednesday in a phone interview. “And if there are concerns over that, there is a pull-back of investment in trying to shore up rainy day reserves.”

The slow start contrasts with that of the U.S., which had $117 billion in stock sales in the first half, the data show. While down 15% from $137.9 billion a year earlier, it still marked one of the better six-month periods in the past four years.

Technology drove some of the biggest U.S. deals this year, including the $8.1 billion IPO for Uber Technologies Inc. and a $2.34 billion sale for its ride-sharing rival Lyft Inc. The tech sector also produced the second-biggest IPO of the year in Canada -- Montreal-based software firm Lightspeed POS Inc. raised C$276 million in May. That stood behind a C$538.9 million offering from Mercer Park Brand Acquisition Corp., a firm targeting the cannabis industry.

No End in Sight for U.S. IPO Frenzy as Share Gains Pile Up

“We are a bit out of step with the U.S.,” Braunsteiner said. “What's really carried the market there is the number of unicorn tech IPOs that have happened in the first half of 2019. We just don't have the size of those companies that are able to bring new issues to market.”

Canadian tech companies are still able to get funding through private equity, which is keeping them off public markets, he said.

Corporate Canada's money-raising efforts in the bond market were also down from last year. Issuance in Canadian dollars fell 21% to C$52.3 billion from a year ago.

Toronto-based Northland Power Inc., was Canada's biggest equity financing, at C$862.5 million, followed by Corus Entertainment Inc. with C$548 million, the data show. Royal Bank of Canada led investment banks for arranging stock sales, with almost 18% of the market, followed by Canadian Imperial Bank of Commerce with 15% and Bank of Montreal at 13%.

The second half might provide a brighter outlook for equity raising. Canada unexpectedly swung to a trade surplus for the first time in 10 months in May while business and consumer confidence indicators have been picking up against a backdrop of firmer growth.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, ;Michael J. Moore at mmoore55@bloomberg.net, ;Jacqueline Thorpe at jthorpe23@bloomberg.net, Carlos Caminada

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