Looking back on the initial public offerings of 2007, Lululemon Athletica Inc., the Vancouver-based retailer of yoga-inspired clothing, is among the most notable, if not the most notorious.

Its IPO, dually listed on the Toronto Stock Exchange and Nasdaq, exposed Canadian inves-tors to American IPO culture when it began trading at US$18 a share.

In the U.S., underwriters often price IPOs lower than the market will bear, with the expectation of creating interest and buyers getting a bump up in the marketplace in early trading. Canadian underwriters tend to try to maximize the amount of money raised for the issuing corporation, creating capital rather than a stir on the trading floor.

At its July 2007 launch, Lulu-lemon stock soared at first, reaching the high US$30s in its first weeks and peaking at US$60.70 a share in October 2007. The stock price took a hit when it was disclosed that a line of Lululemon clothing did not have the health properties advertised. It recently traded around $30 a share on both sides of the border. But, in the meantime, Canadian investors lucky enough to get their hands on the IPO have enjoyed a very nice aftermarket uptick.

But for all the fanfare, the Lululemon IPO is the exception to the new rule on the TSX.

The TSX is positioning itself as the premier market for the primary sectors — oil and gas and mining — as well as medium- and small-caps that would get lost in the bigger U.S. markets. Even before the signs of a weakening U.S. market, the TSX was setting its sights on issuers from Australia, China, South Africa, South America, Israel and Europe.

“Small- and mid-cap companies are really at risk of becoming orphans on the U.S. exchanges,” says Richard Nadeau, senior vice president of the TSX in Montreal. “For resources — mining, oil and gas — and small and medium-sized businesses, listing in Toronto represents a competitive advantage.”

TSX Group Inc. executives have been touring their target regions with teams of Canadian law firms, investment bankers and accountants, promoting “the full infrastructure” that Canadian capital markets offer.

“Markets such as Shanghai are growing in the triple digits,” says Nadeau. Keeping abreast of the TSX’s competitors — especially stock markets in young market economies — is a challenge the TSX is prepared to tackle. The TSX’s international business development strategy, in progress since 2002, Nadeau says, “is picking up speed.”

Of the 540 international issuers on the TSX and the TSX Venture Exchange , the majority — 54% — are based in the U.S. But in 2007, 26 of the TSX’s 49 new international listings were from outside of the U.S., representing the majority of IPOs. The TSX already lists 60% of the world’s publicly traded mining companies. For resources companies, there is a distinct advantage arising from the research exposure due to the number of securities analysts following TSX-listed companies.

According to Greg Coelho, senior business development manager at the Australian Trade Commission and Australian Consulate General in Toronto, international firms listing in Canada gain access to Canadian investors — investors familiar with and accepting of the risk associated with exploration and, especially, exploration in emerging economies. As well, the TSX offers the standards and infrastructure of a Western capital market. This, he says, is Toronto’s advantage.

Coelho says Canadian markets and Australian resources companies are a perfect pairing. The two countries have very similar economies and mindsets. Both countries, relative to their physical size, are small in terms of GDP, while resources and services figure prominently in their economies.

“Australia has high standards for [corporate] governance,” he says, which means that an Australian firm is better suited to listing in Toronto than in an emerging market.

Australia is also a leader in mining technology because, as Coelho says, “Australians struggle for every drop of water they can get.” Realizing efficiencies from extraction has made Australia a leader for commercializing technology developed in academic settings. Toronto — as the leading exchange for resources — is not only a great market for raising capital but also a potential market for selling Australian technology.

While Canadians may cringe that an Australian firm owns Alcan Inc., they can rest assured that, because of the increasing international presence on the TSX and TSXV, Canadians own large and prominent Australian mining firms.

@page_break@Rod Barr, national securities partner for Deloitte LLP in Toronto, sees these international listings as just the beginning of the trend of dual listings on the TSX and TSXV from outside of the U.S. — and not just because of softness in the U.S. market. Canadian regulators are adopting international financial reporting standards (IFRS) in 2009 to bring Canada in line with the rest of the world, which will be required by 2013.

In the past, says Barr, the U.S.’s distinctly “rules-driven mindset” placed more emphasis on disclosure and transparency for IPOs. But, beyond that, any serious difference in reporting was a “myth.” That made dual Canada/U.S. listings attractive. “If accounting was a language,” he says, “Canada and the U.S. spoke the same language.”

With IFRS, that will change. “The whole rule and fabric of financial reporting is in for a change,” says Barr. IFRS is the lingua franca of accounting he notes: “In IFRS, we can speak with China.”

The U.S. is the variable; it has yet to announce a time line for adopting IFRS.

Canada has always found ways to accommodate trade with the U.S., and that is unlikely to change. But IFRS will make it easier for the TSX and TSXV to woo issuers from other IFRS countries. Thus, in the future, “dual listings” will mean international listings. IE