The TMX Market Centre in Toronto, on Sept. 11, 2024.Paige Taylor White/The Canadian Press
Canadian capital markets in 2024 were a tale of two starkly contrasting trends.
Sales of new stock issues sank to near historic lows as companies favoured other fundraising methods, with equity issuances totalling $14.8-billion for the calendar year, according to data from LSEG Data & Analytics to be released Friday, down nearly 13 per cent from 2023.
Debt was one clear preference, as companies continued a borrowing binge driven by lower interest rates, pushing corporate debt issuance to $94.5-billion in 2024, up nearly 40 per cent from 2023.
Total equity issuances were less than half of the $31.8-billion annual average since 1998, the second-lowest result over those 26 years. Only the $13-billion in total sales of new stock in 2022 was lower, and that was partly because the year before saw a frenzy of equity deals, with the 2021 total surpassing $52-billion.
As 2024 began, analysts expected central banks in Canada and the United States would lower interest rates several times, said Nitin Babbar, global co-head of equity capital markets at Royal Bank of Canada, which was the top investment bank in Canada for stock deals during the year. Many public companies were waiting for rate cuts to start, which was not until later in 2024, before giving serious thought to new stock sales.
“Those cuts got deferred, which pushed out activity” Mr. Babbar said.
There were some bright spots during the year, he said, including when First Quantum Minerals Ltd. FM-T raised nearly $1.6-billion in a common share offering to stabilize its balance sheet after the government of Panama forced the company to close its massive copper mine in the country. That was the only Canadian equity financing deal in 2024 with proceeds in excess of $1-billion.
“With the rate environment now stabilizing hopefully near its lows, we feel pretty confident going forward,” Mr. Babbar said.
Jackie Nixon, who joined RBC from Goldman Sachs midway through 2024 to lead its Canadian equity capital markets team, said Canada’s long-moribund initial public offerings market was also showing signs of a rebound. She cited Montreal-based retailer Groupe Dynamite Inc. GRGD-T launching Canada’s first and only major IPO of 2024 in late November as evidence of renewed investor interest in such offerings.
“While the stock didn’t pop out of the gate, it is currently trading above issue price and there are more catalysts to come,” Ms. Nixon said. “We are having conversations with other issuers about prospective IPOs who are either in prospectus drafting stages or others who are at earlier stages but are at least thinking and talking about them again.”
In the debt markets, Patrick MacDonald, co-head of Canadian debt capital markets at RBC, said the surge in corporate borrowing is likely to continue in 2025 despite activity in 2024 already at the highest level in more than a decade. Companies will likely continue to refinance higher-interest loans before they are due for repayment.
“There is continued demand and flow of funds into fixed income,” Mr. MacDonald in an interview. RBC was the top investment bank in Canada for debt issuances in 2024. “We have seen no slowdown by way of investor enthusiasm and investor interest,” he added.
Rob Brown, Mr. MacDonald’s co-head, said “there are some storm clouds on the horizon” in terms of Canada’s continuing productivity challenge and trade policy and tariff threats being made by U.S. president-elect Donald Trump.
“But as we currently stand, investors are keen to deploy capital, issuers are keen to access the market and, as they say, we shall make hay while the sun shines,” Mr. Brown said.
The outlook for merger and acquisition activity for 2025, meanwhile, remains a mix of sun and clouds. Stripping out the US$58.9-billion attributed to Alimentation Couche-Tard Inc.’s ATD-T offer to buy the Japanese parent of the 7-Eleven convenience store chain – which LSEG included in its 2024 data despite that deal remaining at the offer stage through the end of the year – and total M&A for 2024 was US$193-billion, up 3.5 per cent from 2023.
“The level of diligence and the number of deals that fell apart during diligence was higher than what we would have been finding during the boom around 2021,” Cheryl Satin, M&A partner and co-leader of the business law practice at Blake, Cassels & Graydon LLP, which was the second-most active legal adviser for M&A in Canada last year.
Deal making scrutiny is digging deeper and taking longer than ever before, she said, as companies continue to take a more cautious approach to acquisitions. Ms. Satin said continuing regulatory and geopolitical uncertainty means that cautious approach to M&A will likely persist into the early months of 2025.
“There is definitely a lot of cautiousness going on right now in terms of taking steps on new transactions going into an uncertain regulatory environment on both sides of the border,” she said, adding the first three months of next year might see subdued deal-making activity as investors parse the early days of the next Trump administration in the U.S. and the possibility of a Canadian federal election before confidence in markets returns.
“That is where I think the optimism would be, after the first quarter,” Ms. Satin said.