Canadian companies sold a record $34.8 billion in stock this year as mining firms such as Barrick Gold Corp. took advantage of a market rebound to raise cash.
With three months left in the year, Canadian stock sales have already surpassed the previous record of $34.5 billion raised in all of 2007, according to data compiled by Bloomberg going back to 1999.
Canadian companies are selling common stock and preferred shares as the nation’s benchmark stock index rebounds from a five-year low. The S&P/TSX Composite Index rose 23 percent this year before today, and soared 46 percent from a March 9 trough, as investors stepped up stock purchases.
“We’re in the sweet spot for equity markets,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages about C$4 billion ($3.7 billion).
Canada’s economy will grow more in 2010 than previously forecast led by commodity prices that have rebounded ahead of a global recovery, the International Monetary Fund said in its World Economic Outlook report yesterday.
Gold mining was the largest source of equity financing in Canada this year, led by Barrick Gold’s $4 billion sale last month, a Canadian record. Kinross Gold Corp., Canada’s third- largest gold producer, raised $414.6 million in January.
Open Markets
“Given the size of some of the deals we’ve seen recently, I’d say those markets are open and I’d say there are a lot of generalist investors today looking at gold exposure,” Kinross Chief Executive Officer Tye Burt said in a Sept. 28 interview. “There’ll probably be more appetite for new issues.”
CIBC is the top bank for stock sales this year, helping raise $5.17 billion, followed by RBC Capital Markets, with $5.16 billion, according to Bloomberg. Scotia Capital ranked third at $4.38 billion, followed by TD Securities and BMO Capital Markets. Rankings are based on sales of stock, preferred shares and convertible bonds.
“Cash is coming off the sidelines as investors are looking for riskier assets and higher returns,” said Sante Corona, head of equity capital markets at TD Securities in Toronto. “Investors are investing that cash in the stock market and the new issue market.”
IPO Rebound
Initial public offerings also rebounded from a year ago, driven by IPOs from mortgage insurer Genworth MI Canada Inc. and power-plant operator Capital Power Corp. Montreal-based retailer Dollarama Inc. plans to raise about C$300 million next week in Canada’s third-biggest IPO this year.
Canadian companies raised $1.37 billion in initial stock sales this year, from $772 million in the same period a year ago.
Still, the pace of stock sales may slow after the surge this year, said Roman Dubczak, head of equity capital markets at CIBC.
“We’re at the stage where the supply might be drying up to some extent,” said Dubczak. “That will have to be driven by general economic expansion and financing of capital expenditures” and mergers.
The value of equity financings rose 55 percent in the first three quarters of the year from the same period a year ago, according to Bloomberg data. The number of transactions fell 23 percent to 408 from 529.
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