Canadian initial public offerings are expected to remain strong in 2011 as investors continue to have an appetite for new issues, a survey released Tuesday suggests.

"Recent market returns indicate valuations and investor confidence are improving," Neil Manji, national IPO services leader at PricewaterhouseCoopers, said in a news release.

Mining and the energy sector drove IPO activity in 2010 and are expected to continue to do so into 2011. (Jeff McIntosh/Canadian Press)

"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."

The annual study showed that 25 new issues were offered on the Toronto Stock Exchange S&P/TSX composite index in 2010 for a combined value of $5.2 billion, up from four IPOs worth $1.7 billion in 2009. The smaller TSX Venture exchange accounted for 42 IPOs worth $347 million in 2010 compared with 20 IPOs for $69 million in the previous year.

The largest issue was the $1.3 billion offering 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 oil and gas sector's $2.7 billion in new equity offerings accounted for almost half of the total funds raised on all exchanges during the year. Mining represented approximately $1 billion, with $645 million raised in new real estate equity.

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 said.

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

Momentum sustainable

And the steady recovery from the decade low of $682 million in new issues on all exchanges in 2008 has given hope that the momentum will continue into 2011, Manji said.

"At the beginning of the year, we suggested an IPO market of $4 billion was attainable in Canada for 2010," he said. "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."

Manji said that even with the smaller periods of stability, "companies that were well prepared and able to move quickly took advantage of the steadily improving market conditions."

Still, Manji sees the same conditions prevailing in 2011 that roiled the markets last year.

"We still have volatility, which hurts the IPO market, and many of the elements that shaped 2010 may influence 2011," he said.

"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."