Trade uncertainty roiled markets and dampened debt and equity sales last year, a trend that is likely to stretch into the new year.
Investment bankers helped companies in Canada raise $29.3-billion through 329 stock sales in 2018, according to data from Refinitiv. That’s down from $40.3-billion via 384 issues during the previous year.
“The decline in energy issuance was the largest contributor to the decline in equity new issue volumes this year,” said Sante Corona, head of equity capital markets at TD Securities. TD came in first for equity issuance last year. Its largest equity deal was the Stella-Jones concurrent private and public offering, at $876.5-million.
Mr. Corona noted that, according to the bank’s calculations, the energy sector was responsible for roughly half of the new issue volume in 2016 and in 2017. Last year, it made up only 5 per cent, he said.
“Looking forward, more stable markets would be constructive to new issue activity recovering,” Mr. Corona said.
One notable bright spot was the cannabis sector, which helped boost Canaccord Genuity to fifth place in the annual deal rankings. Canaccord, GMP Securities and other independent investment banks dominate coverage of the nascent industry, while many of the big Canadian banks have mostly watched from the sidelines.
Corporate debt issuance started the year off strong but plunged in the second half, bringing the total to $52.9-billion, down from $67.5-billion in 2017.
“The last six months of the year were among the slowest in terms of corporate new issue volume in Canada since the global financial crisis,” said Rob Brown, co-head of debt capital markets at RBC Dominion Securities. RBC snagged the top spot for corporate debt issues, bookrunning 85 out of 130 deals.
Patrick MacDonald, co-head of debt capital markets at RBC, said trade discussions between the United States and China, as well as the renegotiation of the free trade deal between Canada, Mexico and the U.S., created tremendous uncertainty in 2018.
“With uncertainty comes volatility and with the volatility came deterioration in credit spreads,” Mr. MacDonald said.
Last year also saw 19 initial public offerings, which raised a total of $1.8-billion. That compares with 23 IPOs raising $4.76-billion in 2017.
“The fourth quarter was pretty respectable when you consider the market volatility in December,” Dean Braunsteiner, national IPO leader at PricewaterhouseCoopers Canada, said in a statement.
However, Mr. Braunsteiner said last year’s data were skewed by Kinder Morgan Canada’s massive $1.75-billion IPO. Smaller stock sales are more typical of the Canadian IPO market, he added.
“2018 was reflective of a more normal market in Canada,” Mr. Braunsteiner said.
It’s unclear what 2019 will look like for IPOs, given the continuing uncertainty around interest rates, the Brexit saga and global trade tensions, Mr. Braunsteiner said. All of those factors are expected to persist well into the new year, making it difficult to value new issues and bring them to the market.
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Alexandra Posadzki