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Maybe Canadian investors are masochists.

That might be the only way to explain why they keep supporting big share offerings from resource-related companies amid mixed market returns and a weak outlook for commodity prices.

Pembina Pipeline Corp. is the latest to ask investors for fresh funds, selling $400-million worth of new shares in a bought deal late Tuesday. The deal follows Enbridge Income Fund's $700-million offering a month ago. Both companies will use the money to expand their pipeline networks.

That Canadian investors are willing to support their country's big companies in such rough markets could very well be called patriotic. Before its share sale, Pembina's stock had fallen 26 per cent in 2015; Enbridge Income Fund's had dropped 15 per cent. Even if buyers believed there was long-term value at the lower prices, it was a big risk.

Even more troubling, the track record for all large resource-related financings this year has been mostly dismal. Of the 12 offerings worth $300-million or more, none are trading at levels that make investors any money. The average return for anyone who bought shares in these offerings is negative 29 per cent.

One deal did prove to be profitable for buyers. Romarco Minerals Inc. sold shares for 58 cents each in January; in July the company was bought by OceanaGold Corp. for 68 cents a share.

But acquisitions can't be relied on to boost returns in this market. Stripping out Romarco's gain – so, counting all the shares that currently still trade – the average return is negative 33 per cent.

Some stocks have performed decently since their deals. Investors who bought into AltaGas Ltd.'s $300-million offerings this fall are down only 3 per cent, and those who supported Cenovus Energy Inc.'s massive $1.5-billion financing in February have lost 9.7 per cent.

Others not so much. Anyone who bought into Silver Wheaton's $800-million (U.S.) offering in March, which was used to finance a gold stream acquisition, has lost 41 per cent; investors who supported Baytex Energy Corp.'s $633-million (Canadian) deal in March are down a stunning 67 per cent.

It might be misleading to group all these companies together. AltaGas has a very different business model than a junior gold miner, which has a different focus than Enbridge. Yet they are all connected by the same general theme: the downturn in resources.

Someone could also argue that this very moment in time is a bad time to judge returns because the broad S&P/TSX composite index is falling – things might look very different in two months time.

That's the whole point. No one knows how the market will fare in the near future, yet Canadian investors have continuously believed things will undoubtedly get better soon.

This seems to have been the main driver behind early support for resource financings – particularly for energy companies – in the first half of the year. Many investors thought the market had oversold on fear mongering and that once energy producers cleaned up their balance sheets and prices stabilized, everything would be okay.

The problem: The outlook keeps getting worse. On Tuesday, the International Energy Agency updated its oil demand forecast, and now predicts a supply glut to last until 2020 – which means oil prices aren't expected to rise to $80 (U.S.) per barrel until then.

Canadian investors aren't the only ones to have been burned. The same story has played out in the United States. And as much as the returns sting, our large resource companies would be in even worse shape had it not been for shareholders stepping up to support them – in some ways, the whole country should grateful.

For portfolio managers, that probably doesn't feel like much of a silver lining as year-end approaches.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:59pm EDT.

SymbolName% changeLast
ALA-T
AltaGas Ltd
+1.53%29.92
B-N
Barnes Group
-0.88%37.15
BTE-N
Baytex Energy Corp
+3.71%3.63
BTE-T
Baytex Energy Corp
+2.52%4.89
CVE-N
Cenovus Energy Inc
+0.76%19.99
CVE-T
Cenovus Energy Inc
+0.56%27.08
ENB-N
Enbridge Inc
+0.53%36.18
ENB-T
Enbridge Inc
+0.29%48.95
NB-T
Niocorp Developments Ltd
+0.82%3.68
OGC-T
Oceanagold Corp
+0.99%3.06
PBA-N
Pembina Pipeline Cor
+0.71%35.34
PPL-N
PPL Corp
+0.4%27.53
PPL-T
Pembina Pipeline Corp
+0.42%47.81

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