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Dye & Durham Ltd. soared in its debut as a public company Friday, fuelled by strong demand for technology stocks during the pandemic. The offering also gave hope to Bay Street investment bankers of a long-awaited surge of initial public offerings from the domestic tech sector as digital economy stocks continue to perform strongly during the pandemic.

The Toronto legal software provider, which completed a $150-million IPO at $7.50 a share, saw its stock open at $11.49 on the TSX and close at $14.80, almost twice the offer price. That gave D&D a market capitalization of more than $610-million.

The impressive debut came after a well-received virtual roadshow. The offering was about 13 times oversubscribed, prompting underwriters to up the size of the deal to $150-million from $100-million, including $22.5-million in shares sold by insiders. The D&D offering had strong demand from institutional investors, which made up 93 per cent of the order book.

“It shows there’s incredible demand for tech stocks in general that typically perform exceptionally well coming out of a recession,” said David Wismer, co-head, global technology and business services investment banking with BMO Capital Markets, one of the deal’s four underwriters. “Their equity markets are wide open, there is lots of capital on the sidelines looking for good growth opportunities. We’re encouraging potential issuers to come to market.”

The offering is the third successful Canadian tech IPO on the TSX since early 2019, after issues by Montreal retail and hospitality point-of-sale software provider Lightspeed POS Inc. and online training software provider Docebo Inc., which has doubled in value in two months. Other Canadian-listed tech companies, including Shopify Inc., Kinaxis Inc. and Ceridian HCM Holding Inc., have also hit new highs recently.

Tech stocks initially fell as COVID-19 shutdowns began in March, but quickly rebounded and kept rising as investors bid up companies delivering productivity tools for the work-from-home era, including videoconferencing and online education software, as well as digital offerings to service soaring e-commerce demand, including Shopify. This week, National Bank of Canada analyst Richard Tse jacked up his target prices on three Canadian tech companies – Docebo, Real Matters and Shopify – saying they merit a revaluation owing to “material and lasting structural changes” favouring them.

“We are seeing renewed interest from Canadian tech companies in going public” said Mike Lauzon, managing director and head of technology investment banking with Canaccord Genuity, which led the D&D IPO. “For the first time in a very long time we are seeing public market valuations exceed private market valuations ... a number of Canadian technology companies are watching this and thinking of accelerating their [IPO] plans.”

Industry observers say several Canadian tech firms that have fared well during the pandemic are likely IPO candidates in the short to medium term if the stock market strength continues, including Montreal digital payments technology company Nuvei Corp. and corporate search engine software provider Coveo Solutions Inc.

Kitchener-based online learning provider D2L Corp., long considered an IPO candidate, has experienced rising demand for its software this year and “is considering an IPO very seriously in the short to medium term,” said Ian Giffen, a company director. “There is a huge demand among Canadian investors for Canadian tech IPOs ... I expect a number of other Canadian tech companies to follow if the market stays strong.”

The Globe and Mail also contacted several other companies that industry watchers say could go public if they wanted, but executives say they have little interest while private capital markets remain robust. They have little reason to trade deep-pocketed long-term backers for the short-term gyrations of public markets.

“You look at some of those astronomical multiples [in public markets] and you think for a second, ‘Wow, that almost looks like free money,‘” said Mike Wessinger, chief executive of Mississauga-based health software provider PointClickCare, one of Canada’s largest private software enterprises, who almost took his company public in 2015. “But then you go, ‘Yeah, but there’s a burden that goes along with being a public company.' We have all the capital we need” from private investors.

D&D had intended to go public in the fall of 2018, but bailed because of choppy market conditions. Investors were also cool to the fact that more than half of the $125-million in proceeds would have gone to existing shareholders, mainly CEO Matthew Proud and brother Tyler Proud.

The company then addressed investor concerns. Tyler Proud gave up the role of chairman and the company negotiated a $200-million credit agreement, using $50-million to pay a dividend to shareholders. It also made several acquisitions, built key relationships with institutional investors and delivered on its promises, said Neil Selfe, CEO of Infor Financial, one of underwriters of this week’s issue.

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