New issuance has been on a tear over the past few weeks, with a hefty amount of new debt and equity getting sold. Yet the IPO market has stayed sleepy, with very few deals seeing the light of day. (Notable exceptions include Griffiths Energy.)
It looks like this calm could persist for quite some time. Canada’s Venture Capital and Private Equity Association hosted its semi-annual conference this week, and one of the discussions dealt with exiting private equity investments.
Andrew Federer, head of corporate finance at RBC Dominion Securities, sat on this panel. Asked if he could provide an expectation of when the IPO market will be revived, which would create some private equity exits, he succinctly summarized the market sentiment: “Honestly, I couldn’t,” he said.
That’s been frustrating for dealers because companies have been lining up to go public. “There are a number of transactions that are ready to go,” Mr. Federer said. He wouldn’t specify names, but he hinted that some could be targeted at retail investors who are looking for solid yields in this environment.
While you could make the argument that retail investors might scoop those names up now, provided they’re solid companies, Mr. Federer said the dealers have a hard time reading this market. For instance, funding costs are at all time lows, yet there isn’t much borrowing going on, because corporations have already stockpiled cash. (Something RBC's Gord Nixon recently noted was very frustrating for the banks.)
“The market is full of contradictions right now,” Mr. Federer said.