Add Silver Wheaton Corp. to the growing list of large resource deals that struggle to sell.
Since the streaming mining royalties company launched a large $800-million (U.S.) bought deal on Monday, its shares have dropped roughly four per cent and buyers remain skittish, according to someone familiar with the deal.
This is a recurring theme. Since the start of January, more than $2-billion (Canadian) worth of mining bought deals have hit the market, and energy companies have also tested the waters. In many of these offerings, for issuers including Cenovus Energy Inc. and Romarco Minerals Inc., demand has been slow to build.
The key point so far, though, is that these deals eventually get sold. For that reason, it's tough to determine whether anyone should freak out by slow sales in the first few days.
Investment dealers, for one, have proven they aren't all that spooked. They consistently take on the underwriting risk.
The big question for Bay Street is whether anyone will over-extend themselves simply to win business. Even if Silver Wheaton is ultimately cleaned up, the next large deal may not be so fortunate.
The trouble in this market is that many of the fund managers that once piled into resource stocks are now either incredibly nervous, or no longer around because their fund performance was so rough for so long that they were replaced. And whereas financings for financial or industrial companies may attract generalist funds, it takes a lot of confidence for these fund managers to dabble in resources right now.