At first glance, the largest IPO that Canada has seen in 18 months looks likes a flop.
Genworth MI Canada shares slumped Wednesday in their debut on the Toronto Stock Exchange. Shares sold at $19 each in the initial public offering ending the day at $17.89.
The country's second largest mortgage insurer raised $850-million in this offering, and it's one of the few successful IPO seen in the past year.
While everyone involved would have loved to see this stock pop as it debuted, there's no mystery as to why that didn't happen. It's impossible for any stock to shine when the whole market is on a downward grind, and that's what Genworth was up against.
The Genworth IPO was priced on the last day of June. It didn't being trading until eight days later.
During that period, a string of depressing economic developments had the S&P/TSX index in constant decline. It dropped 7 per cent by the time Genworth debuted on July 8. Against that backdrop, the insurer's weak opening was predictable.
Step back from Wednesday's market activity, and you realize that the noteworthy event isn't Genworth's first day of trading. It's the fact that a large, high-quality company has gone public in Canada.
The one decision that could be second-guessed is waiting so long between pricing the deal and opening trading. It's possible to ring the exchange's bell and let the stock rip on a "when-issued" basis as soon as a price is set. Here, that approach would have made for a better opening, but we would have ended up in the same place.
CIBC World Markets, Goldman Sachs and Scotia Capital led the Genworth IPO.
Andrew Willis