Skip to main content

A demonstrator leaves an anti-Brexit protest in Trafalgar Square in London, June 28, 2016. The vote has raised concerns that the trade deal might be stalled.JUSTIN TALLIS/AFP / Getty Images

The market turmoil that erupted in the aftermath of the Brexit vote has claimed a prominent Canadian casualty: MCAP Corp.'s initial public offering.

The mortgage lender filed for a $275-million IPO in May, and institutional and retail orders soon started flowing, according to people familiar with the offering. A few days before Britain's referendum, things came to a halt. On Wednesday, the deal was pulled altogether.

"MCAP Corporation announced today, due to current adverse market conditions, it will not be proceeding with its initial public offering of common shares at this time," the company, a mortgage lender, announced in a statement.

It is a frustrating decision for everyone involved. Because the housing market has been so hot, and because there are comparable publicly traded companies already in the market, such as First National Financial Corp., MCAP was widely viewed as one of the surer bets for a successful IPO.

In the end, prospective investors balked, according to people close to the situation, even though equity markets are now rebounding. Despite the early orders, institutional investors got picky as markets turned volatile. In the past few days some buyers suggested they would support the deal but only at a price below the $18 to $21 marketing range. By Wednesday, the order book still wasn't full.

"Our prospectus set out our goals in terms of the size and the pricing, and we didn't achieve those," an MCAP spokesperson said.

By pulling the plug, the company inadvertently sent a negative message to the entire market. IPOs have all but dried up this year after a blockbuster 2015, and investors have been looking for signs of confidence before they start stepping up to support new deals. A supposed sure bet like MCAP was hoped to provide a good benchmark for future deals; in the end, it only added more confusion.

Canada's dearth of IPOs has been particularly noticeable lately because deal flow, broadly speaking, has been so hot. Investors have even shown a willingness to bet on energy financings, with Suncor Energy Ltd. raising $2.9-billion earlier this month, and Birchciff Energy raising $635-million to help fund its acquisition of Encana Corp. assets. Both deals were heavily oversubscribed.

One IPO, for Mainstreet Health Investments Inc., has been successful and started trading in early June, however, the appetite for future deals still seems rather weak. A successful MCAP offering would have given more confidence to issuers, convincing them to line up and test the waters.

Among the companies that were expected to go public in the fall is mortgage services business Real Matters Corp., based in Markham, Ont., which recently raised $200-million privately to fund its expansion through acquisitions.

MCAP was looking to raise $275-million, the majority of which would be used to pay back early investors who were cashing in. The remaining $100-million was planned to be used by the company for future growth.

At the end of May, MCAP's mortgages under administration totalled $56-billion, up from $36-billion at the end of 2012.