Canadian Equity Financing at Lowest Level in Six Years

Canadian issuers are putting their offerings on the shelf until market conditions improve. Equity financing activity fell to its lowest level in more than six years in the third quarter, plunging 44% from the previous quarter and 24% year-over-year.

The declines were widespread, bringing total equity issuance in Canada to just $6.5-billion as the global financial crises lingered. However, 90% of the reductions came from common equity and income trusts financings, according to a new report.

Jack Rando, Director of Capital Markets at the Investment Industry Association of Canada said in a statement:

The global economic slowdown, weakening commodity prices and gyrations in world equity markets don’t make for an ideal equity issuance environment. When combined with the liquidity concerns already existing in credit markets, access to capital will be an issue of paramount importance in the months ahead.

At the same time, equity trade volumes surged to an all-time high. In the third quarter, 25.7 billion shares were traded on the Toronto Stock Exchange, surpassing a record set earlier this year, the IIAC said.

While initial public offerings on the TSX were non-existent in the third quarter, small caps on the Venture exchange raised just $172-million through 58 offerings – a 75% decline from the second quarter.

Secondary offerings, meanwhile, totaled just $900-million compared to $3.7-billion three months earlier. Private placements were able to make up for some of this loss with $2.6-billion in financing, which was up 15%.

Just six income trust offerings raised $214-million, down 90% from the second quarter, and five preferred share offerings for $1.5-billion represented a 36% quarterly decline.

The IIAC said:

The fall in commodity prices will also adversely impact the level of equity issuance on the part of Canadian resource based companies.