An initial public offering (IPO) is not just a company’s financial milestone. It is also an important barometer of broader market confidence, revealing how capital is allocated, how risk is priced and how an economy enables scaling.

This article examines the state of Canada’s IPO market and draws key insights from Europe and the U.S.

Strong foundations, untapped IPO potential

Canada’s IPO market has declined since its peak in 2021, mirroring a global slowdown as rising interest rates and inflation weighed on equity markets. However, while other major regions have begun to recover, IPO activity on the Toronto Stock Exchange has remained subdued, with only two IPOs and 55 delistings in 2025. This divergence points to domestic economic, structural and regulatory factors.

Canada’s IPO market has declined since its peak in 2021, mirroring a global slowdown as rising interest rates and inflation weighed on equity markets.

Economic factors

Availability and cost of capital
With investor appetite concentrated in large caps, smaller firms face higher financing costs and lower valuations, reducing incentives to go public. This is amplified by the rise of U.S.-weighted exchange-traded funds, reducing domestic capital availability. As Steve Arpin, CFA, MA, managing director, head of Canadian equities at Beutel Goodman, emphasizes, cost and access to capital are the primary determinants in the decision to go public over alternative financing routes, because executives ultimately seek to maximize enterprise value.

Low R&D intensity
On the supply side, Canada’s relatively low R&D intensity (research and development expenditure at 1.79 per cent of GDP versus 2.26 per cent in the European Union and 3.45 per cent in the U.S) limits companies’ ability to scale, narrowing the IPO pipeline.

Structural and regulatory factors

Canada’s public markets remain heavily concentrated in non-technology sectors such as energy and materials, especially among small caps. This reduces exposure to technology, a sector that typically drives IPO activity and which accounted for the second-largest share of global IPO proceeds in 2025.

Existing tax measures offer limited incentives for risk-taking. On the investor side, partial capital loss deductibility tempers small-cap appetite. For issuers, while recent reforms to Canada’s Scientific Research and Experimental Development tax incentives allow companies going public to retain the full enhanced credit, the program remains constrained, with 82 per cent of firms calling for a broader coverage of eligible activities.

Together, these conditions create a thin pipeline of companies reaching scale and a narrow demand for smaller listings.

Meanwhile, private markets and mergers and acquisitions offer viable alternatives, leading to a trend in which “many Canadian technology companies that came public were subsequently acquired by competitors or private equity funds, often delivering reasonable outcomes for shareholders but removing the companies from being publicly traded,” according to Arpin.

Canada’s resource case

In 2025, Canada attracted its highest level of foreign direct investment since 2007, underscoring strong international interest. However, most inflows were through acquisitions, limiting their contribution to IPO activity. This is particularly relevant as global demand for energy and critical minerals rises, areas where Canada holds a strategic advantage.

In 2025, Canada attracted its highest level of foreign direct investment since 2007, underscoring strong international interest.

Foreign direct investment headwinds in Canada’s mining and energy sectors

Sector	Key issues	Effects on attractiveness of foreign direct investment
Mining	10–15 years permitting timeline	Despite being home to 40 per cent of the world’s public mining companies: slow project development; capital preference for faster jurisdictions
Energy	Limited longer term pipeline capacity; slow liquefied natural gas development; policy uncertainty on decarbonization	Restricted access to global markets; discounted pricing; constrained resource development

Although policymakers have outlined priorities to address these constraints, meaningful outcomes will take time to materialize. This raises the question of how other jurisdictions sustain higher IPO activity.

Europe and the Swedish exception

Europe’s IPO activity has been more dynamic than Canada’s, but more volatile than the U.S.’s, highlighting both its strengths and challenges.

As the world’s largest single market, Europe offers access to 440 million consumers and a diversified sector base spanning industrials, health care, financials and luxury. This broadens the pool of potential issuers and investors relative to Canada’s more concentrated market.

Yet, the region faces obstacles that weigh on IPO activity, notably its 27 fragmented regulatory regimes, which increase compliance costs and complicate cross-border listings, pushing issuers to list elsewhere. A cultural preference for real estate over equities also limits household participation.

Sweden, however, stands out as a notable outlier.

When policies and resilience shape market behaviour: Sweden’s case

Over the past decade, Sweden has hosted more IPOs than France, Germany, the Netherlands and Spain combined, propelling Stockholm past London as Europe’s busiest equity market and into the top global listing venues. In 2025, Sweden’s Verisure became the world’s second-largest IPO and the only European in the global top five.

Sweden’s success reflects a combination of long-lasting policy effects and resilience.

Enduring effects of past policies
A 1980s tax incentive laid the foundation for an equity-savings culture. Johan Flintull, global co-head of investment banking at DNB Carnegie (the leading investment bank in the Nordics region), highlights that “there is almost always a local bid for IPOs.” Today, over 85 per cent of Swedes hold equities, directly or indirectly, largely via tax efficient accounts (approximately 1 per cent annual levy, no capital gain or dividend tax).

A decade later, a reform enabling tax-free computer purchases helped create a tech-literate population. Sweden has since produced over 40 unicorns (companies worth more than US $1 billion), the highest per capita in Europe.

Global ambition by necessity
For Flintull, Sweden’s small domestic market motivates startups to think globally from the outset, accelerating growth and IPO readiness as firms expand. Evolution Gaming illustrates this trajectory: founded in Stockholm, it expanded abroad before listing locally.

Nevertheless, Sweden also faces U.S. competition for capital. Flintull notes that the primary risk is the rise of indexation, which is redirecting a growing share of Swedes’ savings into global index funds, heavily weighted toward U.S. equities. Talent retention also remains a challenge, although improving, with more role models choosing to stay in Sweden.

Sweden offers two key insights for Canada:

• First, sufficiently attractive tax incentives can structurally shape investor behaviour by reducing risk aversion and supporting IPO activity.
• Second, a large domestic market is not a prerequisite for a strong IPO ecosystem: despite a population of about 10 million, Sweden is becoming Europe’s leading IPO venue.

The U.S.: Global centre of IPO activity

In 2025, the U.S reaffirmed its position as the world’s dominant IPO market, delivering its strongest year since 2021. A rebound driven by the technology sector, with U.S. listings representing 42 per cent of global tech IPO proceeds. This performance reflects a culture of risk-taking, where companies are built to scale from inception, reinforced by a robust venture capital and private equity ecosystem, preparing them to go public.

Once public, firms may also benefit from the unique strengths of the U.S. market: deep liquidity, strong analyst coverage, global visibility, a unified regulatory framework and abundant capital. These conditions support faster growth and higher valuations, making them core constituents of major global indices and attracting continuous passive inflows from international investors.

This combination of capital availability, visibility and favourable valuation gives U.S. companies a powerful acquisition currency, enabling them to acquire competitors globally. The example of Slack, originally founded in Vancouver and later acquired by Salesforce, demonstrates how companies are absorbed into the U.S. ecosystem before reaching full scale.

Overall, these advantages attract foreign issuers. However, listing in the U.S. does not guarantee success. Arpin warns that a U.S. listing only makes sense if it delivers stronger valuations or if the company resonates with U.S. investors; otherwise, it can prove costly. Therefore, a strong understanding of the local investor base and clear positioning are essential.

Conclusion

Canada’s culture of prudence is a strength that has underpinned one of the world’s most stable banking systems and established its reputation as a trusted international partner, particularly with the European Union.

However, evidence from the U.S. and Sweden suggests that calculated risk-taking is a key ingredient in vibrant IPO markets, one that Canada may need to further incorporate to unlock constraints rooted in R&D intensity, valuations, cost of capital and scalability. Targeted policy tools, like in Sweden’s experience, could support this shift without compromising the country’s prudential framework.

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Lauretta Chame, CFA, is a volunteer with CFA Society Toronto’s Institutional Asset Management Committee.