One of these things just doesn't belong: Commodity prices are limp, Facebook's stock is face-planting after its initial public offering, stocks in general are sagging – and Canada's IPO market is hopping.
There's an energy company, a miner, a couple of real estate investment trusts, and a casino operator all getting ready to make their debut on Canadian markets in coming months, in transactions that could easily raise more than $1-billion in total if they all succeed.
Why, after months of quiet, are companies choosing now? It's almost summer, when conventional wisdom has long said that deals don't get done. Canadian stocks have slumped from their highs, selling off hard in the past two months. Investor confidence is yet again taking body blows from events out of Europe and weak U.S. economic data. And there's the spectre of the dreadful performance of the overhyped and overpriced Facebook IPO.
By normal measuring sticks, it's ugly. But companies and investors have reconciled themselves to doing business in an ugly world, and the resumption of the beginnings of a strong IPO market is a welcome sign that companies are no longer biding their time, putting off decisions in hopes that the world will go back to what was once considered normal.
Bankers say investors have largely been ready for months now. But it has taken companies willing to risk attempting to go public in volatile times to create the other side of the market.
"The money is there for people to invest and investors are taking a good look at things," said Dan Nowlan, head of equity capital markets at CIBC World Markets. "The only reason there hasn't been a good IPO market is a supply issue."
That is suddenly much less of a problem. The list of those looking to launch on Canadian markets has companies of many flavours, albeit with a strong theme of yield running through all the transactions.
Summer is no longer an obstacle. Even if investors are on holidays, technology makes them reachable.
The shadow cast by Facebook Inc.'s dreadful debut – it's down almost 30 per cent – hasn't been a real issue, bankers say. In large part, that is because the companies seeking to go public in Canada are in very different sectors.
However, Facebook's performance drives home the point that pricing has to be realistic. Even a steady, great-performing stock such as Enbridge Inc. can turn investors off if the seller is greedy.
Enbridge tried a $400-million stock sale last Thursday at a scant 0.3-per-cent discount to the market price, and investors balked. Market sources say that many of the almost 10 million shares that Enbridge sold last week via TD Securities have yet to find a home, and Enbridge stock closed Monday at $39.34, 3.4 per cent below the offering price of $40.71.
The best bets to make it to market from the current crop of IPO candidates are likely the REITs and Gateway Casinos, which offer yield and the lure of a steady underlying business. The commodity-focused names are more touch-and-go and dependant on commodity prices co-operating.
HealthLease Properties REIT, which owns and develops seniors housing, is set to price its $110-million IPO this week, perhaps as soon as Wednesday. It's a good bet to go off smoothly, say people who have looked at the deal, because there is solid institutional interest.
Another REIT, Pure Multifamily, is said to be seeking $20-million but may be able to bring in double that amid strong interest from retail investors.
Also ready to go is Argent Energy Trust, an owner of U.S. energy assets, which is looking to raise $325-million. That deal is poised to hit the market as soon as energy prices stabilize enough to set a good tone.
After that, look for casino operator Gateway Casinos, which is being sold by its private equity owners, and then base metal miner Intergeo, which is backed by Russian billionaire Mikhail Prokhorov but has chosen Toronto for its listing. Both should be big enough to rank among the largest IPOs of the year.
If a good many of the deals that are in the pipeline get done, it will be a nice series of cheques for underwriting firms who have otherwise seen their business go quite quiet in recent months.
But more than that, it will be a vote of confidence in Canadian markets as a place to raise money, even in a turbulent world.