(Bloomberg) -- Bank of Montreal’s capital-markets unit was the top arranger of initial public offerings in Canada in 2022, eking out two significant deals in a year when plunging equity prices all but froze the market for companies seeking to sell shares for the first time.

Canadian companies undertook 112 IPOs with a total value of C$1.82 billion ($1.35 billion) last year. That’s down 85% from 2021’s record C$12 billion in deals. BMO Capital Markets, which handled two offerings with a total value of C$197.6 million last year, previously held the top spot on the Canadian IPO league tables in 2018.

The economic uncertainty and geopolitical turmoil that heightened volatility and sent global equity markets into a tailspin last year put investors in a risk-off mood, weighing on the valuations private companies could garner in public markets. Those tough conditions are still largely in place, presaging continued weakness for IPOs in the first half of the year, said Peter Miller, head of equity capital markets for BMO Capital Markets.

“We still have a good amount of uncertainty, so I think the first quarter is going to feel like the fourth quarter,” Miller said. “It’s going to be challenging until we see some surprise inflection in the inflation data.”

The largest IPO last year was for eye health business Bausch + Lomb Corp., a deal that raised $711.9 million for Bausch Health Cos. as part of its plan to separate some of its businesses. The next biggest deal was the $125 million offering from apartment owner Dream Residential Real Estate Investment Trust.

The torrid pace of IPOs in 2021 depleted the roster of companies that are ready to go public, adding another headwind that may restrain the volume of deals this year, said Sante Corona, head of equity capital markets for Toronto-Dominion Bank’s TD Securities.

“That really robust second half of 2020 and 2021 brought forward a number of IPOs that were expected to come to market in 2022 and 2023,” Corona said.  

The companies that will lead the IPO market out of its doldrums probably will be larger firms that can produce cash flow even during a recession, said Chris Blackwell, head of Canadian investment banking at Canaccord Genuity Group Inc. Select diversified names, commodities producers and miners may be among those that help reopen the market, he said. 

“As in past cycles, what you’ll see first are the highest quality, best IPO candidates,” Blackwell said. “They’ll clear the market, get people confident again and get some momentum going. That will start the IPO cycle.”

Canada also posted a dismal year for equity and equity-linked sales in 2022, with 403 deals totaling C$19.3 billion. That’s down 66% from 2021’s record tally of C$56 billion.

That market is likely to return this year as central banks end their rate-hiking cycles, giving investors a more stable environment to work in, said Nitin Babbar, global co-head of equity capital markets for Royal Bank of Canada’s RBC Capital Markets.

“I don’t think we’re that far away from a point where either a convertible with a premium conversion or equities are going to make sense,” Babbar said in an interview. “The deals that we’re going to see are usually going to be based on growth, where there’s acquisitions and they need financing, and the markets will support them.”

One of the year’s biggest deals was a C$1.8 billion offering from pipeline operator TC Energy Corp., with the proceeds earmarked to help build the Southeast Gateway Pipeline, an offshore natural gas line in Mexico. Deals similar to that may crop up this year, said Jake Lawrence, head of Bank of Nova Scotia’s global banking and markets division.

“What I see being active is capital-intensive businesses that are continuing to grow and consolidate and have performed pretty well through the past year,” Lawrence said. “I think real estate fits with that. I think mining, power, utilities and industrials also fit.”

Technology deals were a far smaller part of the equity capital markets last year than in 2021, and Canada isn’t likely to see a wave of tech IPOs soon, Tyler Swan, head of equity capital markets at Canadian Imperial Bank of Commerce. Still, the sector has developed a better pool of talent in recent years, and there’s a longer roster of companies that may go public in the future, he said in an interview.

“I do think that the proportion of financing activity that comes out of the tech sector is going to be a bigger part of the pie over the longer run,” Swan said. “But, in the near term, I expect that part to be quite quiet.”

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