Equity issuance surges despite slow market

(August 5, 2004) Equity markets showed strong signs of recovery in the second quarter, as total equity issuance surged, according to the quarterly report from the Investment Dealers Association of Canada.

“Despite slower growth in corporate earnings and flat equity markets, equity issuance of $11.65 billion in Q2 2004 still reached its third highest level on record,” the report said.

That represents a 14% increase in new equity issuance from the second quarter of 2003, including $1.3 billion in common equity initial public offerings, a boost of 70% from the first quarter of 2004.

While total common equity issuance was flat at $5.2 billion, the deals that were made carried a higher value, as the number of deals fell 25% from the previous quarter. This was helped along by the $800 million offering of Shoppers Drug Mart by private investors, which alone accounted for 15% of new common equity issuance.

Cashing in on soaring commodity prices, notably oil and gold, the resource sector saw the most activity, accounting for $2.5 billion ࡧ 48.8% of the quarter’s common equity issuance in 381 deals.

The next largest sectors included services, which accounted for $964.8 million, or 18.5% of the total, in 17 deals; and financial and real estate where 20 deals brought in $572.6 million, or 11% of the total.

There were 14 new preferred share offerings, totalling $1.3 billion, which is 96% higher than the first quarter, while limited partnerships accounted for $964 million in new issuance. Income trust offerings flat-lined in the second quarter, but still made up a whopping 36% of total issuance, largely through secondary offerings.

The lion’s share of preferred stock was issued by CIBC, where two offerings totalling $463.8 million made up 35% of all preferred equity issued.

But despite the growth in equity issuance, trading volumes plummeted by 28%, the first decline since the third quarter of 2002.

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