Look for more U.S. names trading on the Toronto market as companies that are "pre-Nasdaq size" turn to Canada to raise capital by going public, predict lawyers from Torys as part of the firm's mid-year report on capital markets.
Torys argues that Canada is attractive for companies in the $50-million to $500-million range and those in the energy, metals and mining, clean technology or technology sectors.
Canada's market is similar enough to the U.S. that a cross-border IPO is generally no big deal, though Torys points to tax planning and accounting compliance as two areas that can slow down a transaction.
The trick is, of course, finding investors to buy. At the moment, Canadian investors are no less cautious than those elsewhere in the world, after being spooked by the sovereign debt problems of many countries.
"The overall mood of Canadian capital markets can only be described as cautious, perhaps even nervous," Torys partner Jamie Scarlett said in the report.
"Does this mean that Canadian equity markets are closed? No, but they are not open to everyone. Investors continue to demonstrate a strong appetite for yield product if it comes from a quality issuer."
"On the IPO front, the market continues to be difficult," Mr. Scarlett added. "Institutional investors are believed to be holding large cash positions but are unwilling to commit while market direction is uncertain. Add to this uncertainty the well-publicized negative performance of the massive Athabasca Oil Sands IPO, and investors are understandably reluctant to dive into the deep end of the IPO pool."