Despite continued volatility in the fourth quarter, the Canadian market for initial public offerings topped $5 billion in 2010, a significant increase from less than $2 billion in 2009, the annual PricewaterhouseCoopers International Limited survey of IPO activity on Canadian exchanges has shown.

A total of $1.2 billion from 31 new issues on all exchanges in the fourth quarter helped push the total for 2010 to $5.5 billion for the first time since 2006, the PwC survey reported.

Ten new issues on the TSX gathered $1.1 billion in new equity during the final quarter of 2010 vs just one new issue at $300 million in the same period of 2009.

The TSX Venture exchange accounted for 17 IPOs during the quarter totaling $139 million, up from 12 issues worth $51 million in the final three months of last year.

The long climb back from the decade low of $682 million in new issues on all exchanges in 2008 has given the Canadian IPO market some momentum going into 2011, says Neil Manji, PwC national IPO services leader, and a reason for continued optimism.

“At the beginning of the year, we suggested an IPO market of $4 billion was attainable in Canada for 2010,” explains Manji. “We exceeded that target and have built a good foundation, but it hasn’t been all smooth sailing. It’s been an uneven market with disparity over valuations that resulted in certain IPOs being shelved or re-priced. However, even with smaller windows of stability during the period, companies that were well prepared and able to move quickly took advantage of the steadily improving market conditions.”

Mining and the energy sector drove activity in 2010, something Manji sees carrying into 2011. But, he says, other fundamentals are also pointing to positive market conditions.

“Recent market returns indicate valuations and investor confidence are improving,” he says, “The demand for yield is also a powerful factor in the market, so real estate and dividend-paying companies will continue to be attractive. Add any kind of good news from the U.S. and the momentum we saw with IPO activity in 2010 should continue.”

Companies from outside of Canada are looking at new issues on Canadian exchanges, a recognition of the stability of the Canadian economy and the maturity of our equity markets, Manji adds.

“We still have volatility, which hurts the IPO market,” Manji cautions, “and many of the elements that shaped 2010 may influence 2011. Concerns in Europe will continue to play on markets and a lack of issues in the $200 million to $300 million range is still the missing pillar of traditional Canadian IPO market strength.”

There were 25 issues on the TSX in all of 2010 with a combined value of $5.2 billion, up from just four IPOs worth $1.7 billion on the senior exchange in 2009, the survey revealed.

The TSX Venture exchange accounted for 42 IPOs representing $347 million in new equity in 2010 compared to 20 IPOs for $69 million in the previous year.

The largest issue of 2010 was the $1.3 billion IPO of Athabasca Oil Sands Corp. in the second quarter. MEG Energy Corp. ($700 million) and SMART Technologies Inc. ($660 million) rounded out the list of the largest issues of 2010. The $300 million offering by Whistler Blackcomb Holdings Inc. was the largest new issue of the fourth quarter.

The oil & gas sector represented $2.7 billion in new equity in 2010, nearly half of the total funds raised on all exchanges during the year. Mining accounted for approximately $1 billion while $645 million was raised in new real estate equity.

PwC has conducted its survey of the IPO market in Canada for more than 10 years.

IE