Take-privates in Canada outnumber IPOs, wipe billions off TSX as market treads water
A meandering benchmark index and a slew of companies going private have left Canada’s capital markets in a precarious position.
The number of companies leaving the country’s public markets has exceeded new ones joining. In 2023, 19 publicly listed Canadian firms have gone private and taken about $12.5 billion off the Toronto Stock Exchange and junior TSX-Venture, including one that went bankrupt. Summit Industrial Income REIT, valued at US$4.2 billion, and Home Capital Group Inc., which fetched a US$4.1-billion valuation, were the two largest Canadian take-private deals this year.
New listings haven’t kept pace. There has been just one initial public offering on the TSX this year and another 12 companies debuting on the junior exchange, raising a total of just US$114 million.
“Given how unreceptive the markets have been to IPOs generally, I don’t see a scenario where you wouldn’t have more take privates than IPOs,” said J.R. Laffin, co-head of capital markets and public mergers & acquisitions at Bay Street law firm Stikeman Elliott.
Large private equity firms still have a lot of dry powder to deploy in public markets where small- and mid-cap firms are trading at discounted valuations, Laffin added.
Partly as a result of the privatizations, the total market capitalization on the TSX is teetering on the edge of a decline. It dropped to $3.77 trillion at the end of October, a decline of 1.5 per cent over the last 12 months, according to Bloomberg calculations. An annual contraction would be the first in five years, though so far the market value remains one per cent higher on a year to date basis.
More concerning is the 3.7 per cent gain this year by the country’s main equities benchmark, the S&P/TSX composite index, a
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