Canadian market sets new issuance record

The Investment Dealers Association of Canada (IDA) has declared 2005 “another banner year” as new equity issuance topped $48.9 billion in Canada, breaking last year’s record by 2.5%. Not only was there plenty of new issuance, but also brisk trade. Total volume on the TSX hit $17.7 billion in value for the fourth quarter, up 9.9% from Q3 and 9.9% from the same quarter a year earlier.

“Common equity’s traditional domination of financings has dwindled in recent quarters with the trust frenzy hitting Bay Street and Main Street,” say the authors of the IDA’s quarterly Review of Equity New Issues and Trading.

On a full year basis, income trusts led the way as companies in the energy sector issued more units. Trust issuance totaled $20.2 billion, an 18.6% increase over 2004, with secondary issues making up $10 billion of the total.

Despite being a dominant force in earlier months, income trusts issuance fell off in the fourth quarter, after the federal government wondered out loud about how best to deal with the structures’ tax advantages. Total value of trust issuance dropped 48.6% from the third quarter to just a little over $3 billion.

“Barring this snag, 2005 was definitely the ‘Year of the Income Trust’ with a record $20.2 billion or 41.3% of the total financings last year,” the IDA report says. “The trust market — where many trust companies reside in oil & gas — was undoubtedly a prime beneficiary of chart-topping oil prices.”

With trusts out of favour in the fourth quarter, common equity issuance increased. The number of secondary issues increased 118.8% in Q4 to 70 deals, while the value of those deals increased by 168% to $3.1 billion. The number of common equity IPOs increased more than 74% in Q4, but the value crept up just 3.1% to just under $1.8 billion.

Over the course of the full year, there were 2,217 separate common stock issues completed, a 12.2% drop in the number of transactions from 2004. The value of those deals fell 14.4% to $22 billion. The number of initial public offerings (IPOs) increased by 12.9% to 184, with a value of $5.2 billion, up 25.5%.

Secondary offerings slipped just 0.6 on a full-year over year basis, while their overall value fell 49.8% to about $6.4 billion.

There was an increase in preferred share activity in 2005, as these financings reached $1.22 billion in Q4 05, up 3.3% quarter-over-quarter and 75% from Q4 of 2004. Over the full year, preferred financings totaled $5.1 billion, up 76.5% from 2004.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com