News: IPOs grind to halt in North America

"Everybody say IPO ..." Source: WJS

By Jamie Sturgeon, Financial Post | 10.03.2008

Unprecedented uncertainty in capital markets has wilted all demand for initial public offerings in North America.

In Canada, not a single IPO was launched on the Toronto Stock Exchange in the third quarter, marking the first quarter in at least a decade that Canada's largest equities market failed to attract a new listing, according to a report from PricewaterhouseCoopers.

"Over the years we've been doing this, I don't think there's ever been a quarter or six-month period with zero," Ross Sinclair, partner and national leader for PwC's IPO and income trust services, said yesterday.

Indeed, the previous low for new TSX offerings was in the third quarter of 2007, when four issues raised $254-million.

For the year, there has been a total of 53 offerings launched across all Canadian exchanges, raising $680-million, marking the slowest pace of new offerings since PwC began tracking Canadian IPOs in 1998.

In contrast, 63 offerings were made through the first three-quarters of 2007, totalling $1.2-billion. Two years ago, 95 new issues valued at $4.7-billion were brought to market through the first three quarters.

"You're looking at a market that used to generate five or six billion dollars to now hundreds of millions -- it's down to a trickle," Mr. Sinclair said. "There's nothing happening."

Activity for the three months ending Sept. 30 would be at a virtual standstill if not for the 14 new issues on Toronto's Venture Exchange, which raised $66-million.

The downtrend partly follows a long-term slowing in IPOs dating back to late 2006. It was then that new federal taxation curtailed the explosion of income trusts -- a significant driver of new issues at the time.

Yet the "worsening environment" in capital markets through the year culminating in September has dried up demand wholesale, Mr. Sinclair said.

"A market is a meeting point for a willing buyer and a willing seller, and until some degree of stability returns, and we regain some certainty and predictability, we won't have a market," he said.

Moreover, given unfolding events, "there's not much hope for much IPO activity throughout the rest of 2008."

The bleak assessment extends south of the border.

Not a single American company attempted a public offering in September, according to an IPO tracking service, Hoover's Inc.

It's indicative of the constricted position the remaining underwriters on Wall Street are in as investment banks typically contribute their own capital to a client's public offering, said Tim Walker, IPO research manager at Austin, Tex.-based Hoover's.

"There's no stability in the market," he said.

According to Hoover's data, a mere five IPOs were launched across all American exchanges in the third quarter, raising US$917-million. A year earlier, there were 38 offerings valued at more than 10 times that.

The results bring the amount of new issues in the U. S. for the year to 30 companies, compared with 134 through the first three quarters last year, and 133 in 2006.

Total proceeds from this year's U. S. IPOs are US$24-billion. A "low" figure, Mr. Walker said, but even more disconcerting when one considers that US$18-billion or 75% of that stems from the IPO of Visa in March.

"That's what tells you how abysmal this IPO market is."

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