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A sign displaying a Nuvei logo at the Toronto Stock Exchange in Toronto, on Nov. 5, 2020.

Mark Blinch/Globe and Mail

Intense investor demand for initial public offerings, fuelled by frothy equity markets and record low interest rates, is expected to compel more companies to list their shares this year and capitalize on the craze.

The trend gathered steam in the second half of 2020, with multiple companies discovering more demand for their deals than there were shares available, and is expected to remain feverish as stock markets in Canada and the United States trade near record highs.

For many issuers, such as Nuvei Corp. and Dye & Durham Ltd., investors have continued to support the shares long after their deals closed, which gives IPO candidates even more reason to go public.

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Dye & Durham Ltd., which provides software for legal and business professionals, listed its shares at $7.50 each on the Toronto Stock Exchange in July, and the stock closed at $43.31 Wednesday. Montreal-based Nuvei, which handles payments, went public at US$26 a share and closed at US$51, giving it an US$7.5-billion market value, even after a broad tech sector sell-off on Wednesday.

Because valuations have jumped so significantly, particularly for software companies, the list of issuers that can consider going public is growing. “All of a sudden, companies that were too small to go public now can,” said Peter Miller, head of equity capital markets at BMO Nesbitt Burns, which was the top underwriter for equity offerings last year, according to Refinitiv data to be released Thursday.

There is such interest in going public that bankers say they are getting invited to pitch their underwriting prowess for potential IPOs, instead of having to convince clients of the merits of being publicly listed.

TOP UNDERWRITERS FOR CANADIAN EQUITIES

Amount (billions)

Rank

Bank

No. of issues

BMO Nesbitt Burns

$4.1

53

Citigroup

3.0

9

Scotia Capital

2.9

30

2.5

Credit Suisse Securities

9

TD Securities

2.4

21

TOP UNDERWRITERS FOR CANADIAN DEBT – ALL TYPES

Amount (billions)

Rank

Bank

No. of issues

RBC Dominion Sec.

$57.9

274

National Bank Fin.

52.3

277

TD Securities

39.9

206

Scotia Capital

36.0

202

265

CIBC World Markets

35.7

TOP LEGAL ADVISERS FOR CANADIAN M&A

Ranking value* (U.S. billions)

Rank

Firm

No. of deals

Osler Hoskin/Harcourt

$31.2

123

Stikeman Elliott

30.3

101

Blake Cassels/Graydon

30.2

99

Davies Ward Phillips

& Vineberg

24.8

66

McCarthy Tetrault

23.7

64

TOP FINANCIAL ADVISERS FOR CANADIAN M&A​

Ranking value* (U.S. billions)

Rank

Bank

No. of deals

CIBC World Markets

$30.1

32

Goldman Sachs

29.2

15

RBC Dominion Sec.

28.8

40

BofA Securities

25.2

14

Barclays

24.1

16

*Including debt of target

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: refinitiv

TOP UNDERWRITERS FOR CANADIAN EQUITIES

Amount (billions)

Rank

Bank

No. of issues

BMO Nesbitt Burns

$4.1

53

Citigroup

3.0

9

Scotia Capital

2.9

30

Credit Suisse Securities

2.5

9

TD Securities

2.4

21

TOP UNDERWRITERS FOR CANADIAN DEBT – ALL TYPES

Amount (billions)

Rank

Bank

No. of issues

RBC Dominion Sec.

$57.9

274

National Bank Fin.

52.3

277

TD Securities

39.9

206

Scotia Capital

36.0

202

265

CIBC World Markets

35.7

TOP LEGAL ADVISERS FOR CANADIAN M&A

Ranking value* (U.S. billions)

Rank

Firm

No. of deals

Osler Hoskin/Harcourt

$31.2

123

Stikeman Elliott

30.3

101

Blake Cassels/Graydon

30.2

99

Davies Ward Phillips

& Vineberg

24.8

66

McCarthy Tetrault

23.7

64

TOP FINANCIAL ADVISERS FOR CANADIAN M&A​

Ranking value* (U.S. billions)

Rank

Bank

No. of deals

CIBC World Markets

$30.1

32

Goldman Sachs

29.2

15

RBC Dominion Sec.

28.8

40

BofA Securities

25.2

14

Barclays

24.1

16

*Including debt of target

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: refinitiv

TOP UNDERWRITERS FOR CANADIAN EQUITIES

Amount (billions)

Rank

Bank

No. of issues

BMO Nesbitt Burns

$4.1

53

3.0

9

Citigroup

Scotia Capital

2.9

30

Credit Suisse Securities

2.5

9

TD Securities

2.4

21

TOP UNDERWRITERS FOR CANADIAN DEBT – ALL TYPES

Amount (billions)

Rank

Bank

No. of issues

RBC Dominion Securities

$57.9

274

National Bank Financial

52.3

277

TD Securities

39.9

206

202

Scotia Capital

36.0

265

CIBC World Markets

35.7

TOP LEGAL ADVISERS FOR CANADIAN M&A

Ranking value* (U.S. billions)

Rank

Firm

No. of deals

Osler Hoskin & Harcourt

$31.2

123

Stikeman Elliott

30.3

101

Blake Cassels & Graydon

30.2

99

Davies Ward Phillips & Vineberg

24.8

66

McCarthy Tetrault

23.7

64

TOP FINANCIAL ADVISERS FOR CANADIAN M&A​

Ranking value* (U.S. billions)

Rank

Bank

No. of deals

CIBC World Markets

$30.1

32

Goldman Sachs

29.2

15

RBC Dominion Securities

28.8

40

BofA Securities

25.2

14

Barclays

24.1

16

*Including debt of target

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: refinitiv

The current craze is particularly beneficial to early-stage companies, because many public investors have adopted a venture-capital mentality that focuses on growth potential, not profit. Nuvei lost US$126-million in the first three quarters of 2020, while Toronto’s MindBeacon, which provides mental-health therapy over the internet and went public in December, lost $6.5-million over the same three quarters.

A strong rebound in stock markets from the pandemic lows has made equities of all stripes easier to sell, not just new shares sold through IPOs. “There’s a certain amount of FOMO [fear of missing out],” said Grant Kernaghan, a managing director in Citigroup’s Canadian investment banking division. “Everyone wants to be invested in equities.”

While this boosted share sales last year, Canada’s bump was smaller than those in many other countries, particularly in the United States, where investors were desperate to buy into deals, including large IPOs for companies such as Airbnb Inc. and DoorDash Inc.

In some major instances, Canadian companies are capitalizing on the depth and breadth of U.S. investor demand. Most of the 10 largest equity offerings by Canadian companies last year had U.S. components, according to financial data provider Refinitiv. Deals included offerings by Shopify Inc., Air Canada and GFL Environmental Inc.

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Not only is the American market much larger than Canada’s, even after adjusting for population differences, but Canadian stocks also can sometimes look cheap to American investors. The S&P 500 currently trades at an average price-to-earnings ratio of 29 times, while the S&P/TSX 60 Index trades at 19 times.

Merger and acquisition volumes were muted last year, with deal flow almost non-existent during the worst of the spring lockdowns, but mega-deals have come roaring back and the activity is expected to boost debt financings, which will cushion any drop in debt issues after a stellar year.

“M&A will serve as a driver of financings,” said Patrick MacDonald, co-head of Canadian debt capital markets at RBC Dominion Securities, which was the top debt underwriter last year.

Ultralow interest rates have also encouraged Canadian companies to refinance debt, particularly those with lower ratings who were paying higher yields prepandemic.

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