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Chinese shoes put some kick into IPO market

awillis@globeandmail.com

Action film star Jet Li has found a new stage at the Toronto Stock Exchange.

A Chinese sneaker company that features the martial arts master as its spokesman filed for one of four initial public offerings this week, putting new kick in a Canadian exchange that's finally seeing life in the IPO market.

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Mr. Li, the star of films including Fearless, pitches shoes for Zungui Haixi Corp., a Chinese company that manufactures and sells shoes through 1,600 stores across China. With the stock market on the rise since March, and investors once again interested in riskier plays, Zungui is one of four growth-oriented companies that opted to list on the TSX. It's a sign that the domestic market is finally gathering steam after the U.S. market for new issues began heating up two months ago.

Speaking of steam, a geothermal play called Standard Steam Canada also filed for its debut recently, along with Talison Lithium Ltd. and Uranium Investment Corp.

All of this activity comes after a prolonged drought for new public companies on the TSX: There were just two IPOs on the exchange in the third quarter of this year, worth a total of $950-million, and Canada's senior exchange went for nine months of 2008 with no initial public offerings at all.

"The key ingredients that have been missing in the market - improved liquidity, better pricing and credit spreads, rising valuations and investors regaining confidence - are all contributing to a more positive environment," Ross Sinclair, the national head of the IPO team at PricewaterhouseCoopers, said in a recent report.

Zungui is being floated to Canadians investors by a syndicate of dealers led by CIBC World Markets. Lots of kids seem to want to be like Mr. Li, as the company's revenue grew at a 52 per cent clip over the past three years: Zungui made a $25.7-million profit on sales of $152.4-million last year.

Standard Steam is a Denver-based company that needs capital to buy eight geothermal project in three Midwestern states: Nevada, Idaho and Utah. Research Capital and CIBC World Markets are leading the offering. The TSX has been attempting to woo alternative power companies, and winning this listing would show the exchange is building a following.

Talison Lithium mines and process spodumene, a lithium-bearing mineral, in Western Australia, and this will be pitched as a classic resources growth story, as the company lost $20.2-million (Australian) on revenue of $76.9-million last year. Cormark Securities is leading the underwriting. Uranium Investment is a closed-end fund that's backed by RBC Dominion Securities and expected to raise at least $75-million (Canadian).

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The TSX is already on something of a roll, as new financings by companies that were already listed on the exchange hit an all-time high yesterday of $49.7-billion, with a massive $2.5-billion offering from Manulife Financial helping to set the new high-water mark. The previous record for financings in a single year was set in 2007, when $47.6-billion was raised.

"Achieving record yearly financing, with two months yet to go in 2009, demonstrates both positive investor sentiment as well as issuer optimism that global economic indicators are improving," said Tom Kloet, CEO at TMX Group.

See Andrew Willis's Streetwise Blog at ReportonBusiness.com

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