Canada's IPO Market Shows Revival Signs with AGT and Apotex Deals
After years of false starts and prolonged stagnation, Canada's moribund initial public offering market is finally showing glimmers of hope and potential revival. For the first time since 2021, multiple Canadian firms are actively moving toward public listings on the Toronto Stock Exchange, signaling what could be the beginning of a significant market turnaround.
Major Deals in the Pipeline
AGT Food and Ingredients Inc. announced this month that it is seeking to raise approximately $460 million through its return to Canada's public market. This represents a substantial offering that could inject significant capital into the agricultural ingredients sector. Separately, generic pharmaceutical giant Apotex Inc. is looking to raise as much as $1 billion in a deal that may materialize during the first half of the year, marking one of the largest potential offerings in recent Canadian market history.
Though these numbers might appear modest by New York standards, they represent a sharp pickup for an IPO market that has been mired in an extended dry spell, with typically just one or two companies going public annually in recent years. Toronto's investment banking community reports that additional offerings are in the pipeline, with plans to soon begin meetings with potential investors.
Historical Context and Market Challenges
The number of initial public offerings on the Toronto Stock Exchange has experienced dramatic fluctuations in recent years. From a record high of 42 IPOs in 2021, the market plummeted to a two-decade low of just one offering in 2023. Investment bankers attribute this dramatic decline to multiple factors, including deals that struggled shortly after their 2021 debut, higher interest rates that dampened investor enthusiasm, and the concentration of Canadian companies in sectors like energy and materials at a time when investors were particularly hungry for technology firms.
Joe Kostandoff, managing director and co-head of equity solutions and equity capital markets at CIBC Capital Markets, noted that "I think we should see a more regular cadence than what we saw, certainly, last year." He pointed to healthy valuations, increasing investor demand, and well-subscribed recent stock deals as evidence that the market may be turning a corner.
Additional Candidates and Market Sentiment
The potential IPO revival extends beyond AGT and Apotex. Other candidates for Toronto Stock Exchange listings include:
- Vale Base Metals, which has indicated it is working toward readiness for a public debut
- Onex Corp.-backed WestJet Airlines Ltd., expected to go public within the next couple of years
- Toronto-based Barrick Mining Corp., which is proceeding with an IPO of its North American gold mining assets
Jackie Nixon, head of equity capital markets Canada at RBC Capital Markets, observed that "It does feel like we've got a much more robust pipeline of IPOs now than we've had in the last few years." She added that the potential IPO recovery is unlikely to be interrupted by recent weakness in the technology sector, where concerns about potential disruptions from new artificial intelligence tools are weighing on software and related areas.
Exchange Perspective and Cautious Optimism
An IPO rebound would provide welcome relief for Canada's stock exchanges, which have struggled with a shrinking number of public companies in recent years, even as the overall value of the country's public market has climbed. John McKenzie, chief executive officer at TMX Group Ltd., which operates both the Toronto Stock Exchange and the smaller TSX-Venture exchange, expressed optimism, stating "I'm bullish based on the number of companies that we have in dialog with us that are on an IPO path."
However, market participants remain cautiously optimistic, acknowledging that there have been false starts before and that some recent deals have struggled. For instance, Go Residential Real Estate Investment Trust, which debuted last year, has declined approximately 30% since it began trading.
Despite these challenges, bankers believe the conditions are increasingly favorable for more companies to access public markets this year, potentially breaking Canada out of its prolonged IPO slump. As Kostandoff noted, "This is more about the pipeline of companies choosing to access the market on their own individual timelines." The combination of major pending deals, additional candidates in preparation, and improving market conditions suggests that Canada's IPO market may finally be poised for meaningful recovery after years of disappointing performance.
