Category: Markets

Alberta will invest an additional $1 billion in its energy diversification program, the provincial government announced Monday as it looks for new opportunities for its oil and gas industry. The amount is in addition to the $1 billion announced at the end of February.

Part of the money will be spent on increasing the production of ethane, one of the main chemical compounds found in natural gas and used in plastic production. The province also wants more oil to be refined in Alberta.

The announcement follows the tabling of Bill 1 on energy diversification on Friday.

The government hopes that these loans and grants will result in $10 billion in private investment. The province believes that these various projects will lead to the creation of 8,000 jobs during the construction of the new infrastructure.

Alberta Energy Minister Margaret McCuaig-Boyd says she wants to reduce the dependence of Alberta’s oil and gas industry on pipelines. “We are trying to encourage companies to extract products like ethane here in Alberta rather than exporting gas and crude oil directly,” she says.

Bob Masterson, president of the Chemistry Industry Association of Canada, is saddened to see a large share of petrochemical investments going to the United States rather than Canada. “For five years, we should have seen 25 to 30 international projects announced in Canada, we had only 3,” he laments.

A report from the International Energy Agency released last week predicts that more and more of the world’s oil and gas will be refined to produce plastics , lubricants or cosmetics rather than fuels.

Federal Minister of Natural Resources Jim Carr said he is ready to help the newsprint industry mitigate the effects of countervailing duties imposed last month by the US Department of Commerce.

Speaking Wednesday at the International Conference on Forest Bioeconomy in Montreal this week, he also promised a relentless fight before the World Trade Organization (WTO) and the Free Trade Agreement. North American Exchange (NAFTA) against these protectionist measures, which he describes as “unfair and unjustified”.

“We expect to win as in the past, but we also know that by then it will not be easy for families and communities,” he said.

The US Department of Commerce announced in early January that it was imposing preliminary countervailing duties ranging from 0.65% to 9.93% on Canadian producers of uncoated paper, including newsprint.

Speaking to the press after his speech, Minister Carr said his government was fully prepared to support the industry and sit down with its representatives to discuss appropriate measures.

“We are very interested in helping the industry and are ready to sit down with its representatives to discuss the most effective ways the Government of Canada can help them,” said Carr.

The minister was open to a comprehensive approach similar to the softwood lumber industry, which also has tariffs and protectionist countervailing duties on the part of the United States.

While he has not closed the door on new funding, Carr said his government is looking for ways to help the paper subsector “through its support program.” $ 867 million “to the lumber industry.

“If there are other ways we can help them as conditions change, we have every intention of exploring with them what these options might be,” he said. specify.

The support plan for the softwood lumber sector includes loan guarantees for the industry, access to work-sharing programs for employees, funding to the provinces to support workers, investments in labor-market programs forestry innovation and programs to support the development of new markets.

The duties imposed by the United States stem from the complaint of NORPAC, a small producer in the state of Washington, whose plant has about 260 workers.

Its impact is significant in Canada, where about 25 paper mills are affected; the majority of these plants are in Ontario and Quebec.

In the case of Quebec, the measure has a direct impact on ten factories belonging to the Resolute, Kruger and White Birch mills, which employ some 2,000 workers in several regions (Alma, Amos, Baie-Comeau, Bromptonville, Clermont, Gatineau, Quebec, Rivière-du-Loup, Trois-Rivières).

Protectionist measures are also badly received in the United States by the printed newspaper industry, which struggles to survive in the current economic environment, where the giants of the web – including Google and Facebook – are capturing their advertising revenues.

The imposition of duties necessarily results in an increase in the cost of newsprint in the United States and the News Media Alliance, which represents 1100 American newspapers, is concerned about the impact on employment in the print media, already in crisis.

According to the organization, price increases caused by tariffs will force publishers and printers to reduce costs and possibly layoffs.

Dropbox, Spotify, Uber, Lyft … As IPOs pick up dramatically in the United States, some tech giants dubbed “unicorns” are preparing to hit markets.

In January, 18 Initial Public Offering (IPO) were registered in the country for $7.9 billion of capital raised, a record-breaking start to the year since Dealogic compiled these statistics in 1995.

The year 2017 had already shown the way of the recovery after a slump of three years, 189 companies having entered the United States for $49.4 billion raised capital.

“Wall Street is in very good health, the political context is stable now, the results of companies in the world are good and there is currently no major geopolitical threat that could delay the introduction process”, said Alex Ibrahim, head of the international capital markets division of New York Stock Exchange (NYSE).

Despite the recorded drops on the courses of Snap and Blue Apron since their very remarkable introduction last year (respectively -20% and -70%), the beginnings of the great majority of the newcomers were solid.

The firm Renaissance Capital, specializing in IPOs, noted a gain of 26% on average between the arrival on the market of companies introduced last year and end of 2017.

This favorable environment encourages certain “unicorns”, unlisted companies valued beyond $ 1 billion, of which a hundred are counted in the United States alone, to prepare the ground for their next arrival.

Dropbox, Spotify …

This is the case of the specialist online file storage Dropbox. The company, valued around $10 billion after its last round in 2014, filed in January a confidential application for IPO in the United States, according to the US press.

This request could lead to an IPO by the summer.

Allowed since 2012 by a US law and expanded last summer to large companies by the US Securities Regulator (SEC), this procedure aims to promote IPOs without having to reveal publicly confidential information, at least not before an advanced stage .

“Time to determine if institutional investors have an appetite for the company and if this appetite offers the level of valuation it considers necessary” for its development, said Douglas Ellenoff, a lawyer in business law.

According to Ibrahim, this procedure is used today by 75% of companies that are launching a listing process.

The Swedish music streaming giant Spotify would also be on the list to list the New York Stock Exchange via a direct listing procedure, subject to a green light from the SEC expected soon.

Direct listing, an atypical procedure the NYSE uses to attract new businesses, saves costs associated with a traditional IPO, such as some commissions paid to banks to help companies attract investors. It also prevents companies from raising new capital.

According to the Wall Street Journal , about $ 30 million will be paid by Spotify to the investment banks that follow the operation, which is three times less than when Snap was introduced.

Abundant capital

“Investment banks are usually paid a lot of money to allow a proper listing process. My fear is that the pricing mechanism is not as transparent and mature as it would be in a traditional IPO, “says Ellenoff. In his opinion, this would open the way to a risk of high price volatility in the first exchanges following the introduction.

Like Spotify, widely supported by private investors with deep pockets for several years, other unicorns could follow this model, say many observers. Uber, Lyft or Airbnb are regularly mentioned, the latter, however, said Thursday that it did not provide IPO this year.

“I do not think there will be a tidal wave. But they could follow this path if Spotify’s beginnings are a success, “says Ellenoff.

Kathleen Smith, co-founder of Renaissance Capital, is, however, more skeptical: “There is a reason that direct listing has not been used in the past. The many commissions and meetings that Spotify will need to fund to reach investors could ultimately cost it more in the long run. ”