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Canadian IPO market not keeping up with investor demand: survey

PwC survey found a 'mismatch' between supply of new IPOs and demand.

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Canadian companies are going public at a blistering pace, raising $2.9-billion from 16 initial public offerings in the first half of the year, and experts say investors are hungry for more IPOs than corporations are willing to provide.

The value of IPOs seen in the first six months of 2017 was at a five-year high, according to a survey from PricewaterhouseCoopers LLP.

The pace of activity was in stark contrast to the first six months of 2016, when there was not a single IPO on the Toronto Stock Exchange.

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The first half of the year saw market debuts that included a $1.7-billion share sale from Kinder Morgan Canada Ltd., two oil-patch offerings that raised a total of $275-million and a $100-million IPO from cannabis producer MedReleaf Corp.

"Kinder Morgan's issue was the largest IPO since Hydro One in 2015, but two other energy-sector issues were notable against a backdrop of wildly fluctuating oil prices" said PwC national IPO services leader Dean Braunsteiner. He said: "We sense a long-term view of oil and gas that's more optimistic."

PwC also predicted the "burgeoning" marijuana sector will spawn more IPO activity through the rest of this year and into 2018.

The PwC survey found what Mr. Braunsteiner described as a "mismatch between the supply of new issues and the demand of the market," with investors showing a strong appetite for offerings that is not matched by companies seeking capital.

The availability of attractive options to IPOs, such as private-equity investments, is likely behind this gap.

"There was a time when companies headed for public ownership telegraphed their intentions months or even years in advance," Mr. Braunsteiner said. "Now, high-quality companies may be considering IPOs but they are still keeping their options open for other funding avenues right up until the last minute."

PwC's survey also found a prolonged slump ended in junior resource IPOs, as six mining companies went public on the TSX Venture Exchange over the first half of the year, after several years that featured only a few new issues.

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