There was not a single initial public offering (IPO) made on the Toronto Stock Exchange (TSX) during the last six months of 2008 making it the worst year for IPOs in the last 10 years. The dearth of opportunity is highlighted in PricewaterhouseCoopers' (PwC) annual look at activity on the exchange.
A meagre 57 new issues struggled to reach Canada's equity markets in 2008, according to PwC, with a mere 10 registered on the TSX in the year ended Dec. 31, 2008. There were no new IPOs on the TSX in the final six months of the year. By comparison, there were 100 IPOs on all of Canada's exchanges in 2007, with 36 new issues on the TSX.
The value of all issues on Canadian markets in 2008 was $682 million, down 80% from the $3.4 billion in 2007, the survey showed. The value of all issues on the TSX in 2008 was $547 million, off from $3.0 billion in 2007.
A quick look at the TSX numbers reveals that the mining industry successfully floated 13 IPOs on the senior exchange and 47 IPOs on the venture exchange in 2007. Activity included the largest IPO in North American history ($1.26 billion by Franco-Nevada Corp.) and B2 Gold's $100-million issue on the venture exchange.
Looking at the numbers for 2008, I found only three mining IPOs floated on the TSX: Colossus Minerals in February, PC Gold in May and New Dawn Mining in June. Perhaps our readers know of others.
It is interesting to note that the equity markets dried up well before the global economy crumbled in October 2008. That shouldn't come as a surprise to those of us who follow metal prices. The zinc price has been eroding since December 2006. The nickel price began sliding in May 2007. Copper and lead are down from their highs in the fall of 2007. Likewise aluminum over the past six months. Gone, too, are the days of plus $1,000 gold and $16 silver.
In this cyclical industry, what goes down will come up. The questions that are on everyone's mind are "When?" and "How much?" No one seems able to answer those questions. So the uncertainty, and the lack of equity investments, will continue at least for the first half of 2009.
"It's hard to find much to be optimistic about in this data but it is small comfort to know that it isn't just the Canadian IPO market, or even Canadian equity markets that are struggling," says Ross Sinclair, national leader for PwC's IPO and income trust services. "It appears similar in other major markets. I'm afraid we're in uncharted territory, and it's hard to predict when our IPO market will come back and what a new normal level of activity will be."
It is small comfort to know we are not alone. There will be bright spots for the mineral industry this year, but we are all going to have to work hard to make them happen.
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