Canadian bankers are pitching domestic companies on going public in the new year.Nathan Denette/The Canadian Press
Nobody on Wall Street is going to get their holiday shopping done early.
In a week that investment bankers typically spend celebrating the season – don’t even try for a reservation at a high-end steakhouse – two significant initial public offerings are expected to debut on U.S. markets.
Medical supplies producer Medline Industries LP, currently owned by private equity funds, is expected to raise US$5-billion in the largest IPO seen in four years. The second debut, pegged at US$165-million, comes from Andersen Group Inc., a tax advisory business whose owners include former partners in Arthur Andersen LLP, which collapsed in 2004.
The two stock sales will cap off what’s expected to be a US$40-billion crop of U.S. IPOs in 2025. American bankers put up these numbers despite a 43-day government shutdown that closed the IPO market.
The Medline and Andersen stock sales, if successful, set the stage for a flood of potential offerings in 2026. Look forward to hearing all sorts of noise around an IPO from Elon Musk’s SpaceX, which could launch an offering that values the company at US$1.5-trillion.
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Bay Street, mired in year four of a moribund IPO market, is taking note. Before they head out for the holidays, Canadian bankers are pitching private domestic companies that could potentially go public on taking the plunge in the new year.
And the pitches are being warmly received by corporate executives and the institutional investors whose support for new issues is essential to a successful IPO.
There are no prizes for guessing the top IPO candidates.
In May, Onex Corp. signalled it would likely take WestJet Airlines public in the near future after selling a 25-per-cent stake in the carrier for US$550-million. And in 2021 and again in January of this year, Brookfield Asset Management Inc.-backed battery maker Clarios International Inc. filed paperwork for an IPO, then opted out owing to market conditions.
No one on Bay Street expects the pace of domestic IPOs to match what’s playing out on Wall Street. One of the Canadian economy’s chilling realities is our entrepreneurs haven’t consistently created companies to rival Medline, let alone SpaceX.
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However, there are private domestic companies looking for expansion capital and private-equity funds looking to exit investments. With the Toronto Stock Exchange hitting record highs, owners of those businesses are open to pitches.
The Toronto Stock Exchange rang the bell for a handful of IPOs this year, with mixed results for investors who stepped up.
Over the summer, Go Residential REIT GO-U-T turned in disappointing performance. The Toronto-based owner of U.S. luxury apartment buildings went public at US$15 a unit in July and now trades at US$11.
In October, Calgary-based Rockpoint Gas Storage Inc. RGSI-T showed how IPOs are meant to work, raising $704-million by selling shares at $22 each. The stock promptly jumped to $27.
That sort of IPO pop attracts investors. In the third quarter, what U.S. research service Renaissance Capital LLC called “sizable” IPOs – 24 debuts worth US$100-million or more – averaged an impressive 16-per-cent return for investors. In a report, Renaissance said: “With a solid quarter of activity behind us and more deals lining up in the pipeline, the long-awaited IPO pickup appears to be well under way.”
One of the many reasons companies steered clear of IPOs in recent years is it was just so darned easy to borrow money. Banks and bond markets were wide open to lending. That dynamic may be changing.
On Monday, global consulting firm Teneo published its annual survey of 750 chief executive officers and institutional investors. The firm found 90 per cent of both groups were optimistic or very optimistic about their ability to do equity financings through the first six months of 2026. There was far more pessimism around the continued accessibility and affordability of debt.
The last domestic IPO boom, in 2021, saw the TSX welcome 35 IPOs worth $8.8-billion. With the benefit of hindsight, it is clear COVID-19-pandemic-driven dynamics meant a few tech companies that had no business being public found their way onto the exchange.
The 2021 boom also allowed Definity Financial Corp. DFY-T to go public. Since its IPO, the Waterloo, Ont.-based insurer’s stock price has risen by 170 per cent. Institutional investors are always willing to winnow through the IPOs Bay Street brings their way in hopes of finding the next Definity.
When Bay Street gets back from the holidays, the bankers may be joining Wall Street in an IPO blitz.