Athabasca Oil Sands tanks

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Athabasca Oil Sands debut on public markets Thursday was a disaster, with the much-hyped energy company IPO selling off sharply in its first day of trading.

Athabasca staged one of the largest initial public offerings seen in Canadian markets, raising $1.35-billion by selling shares at $18 each. The IPO was first marketed in February as a $750-million offering, then boosted due to strong investor demand.

When Athabasca shares finally began to trade on the Toronto Stock Exchange, they briefly moved above the offering price, which is what would be expected from a hot deal.

But the warm and fuzzy feelings didn't last long, as Athabasca began a slide that lasted all day, moving below $17. More than 34 million Athabasca shares changed hands Thursday on the TSX, or $610-million worth of stock, a relatively large percentage of the overall offering.

Morgan Stanley and GMP Securities led the Athabasca offering. GMP Securities bought 17 million shares in the Calgary-based over the course of Thursday's trading, and was a seller of 8.9 million Athabasca shares.

Athabasca finished the session with a $6.7-billion market capitalization. The company owns six large oil sands properties in Alberta, two of which are co-owned by PetroChina. The state-owned energy company paid $1.3-billion for a majority stake in these plays last year.

Rival dealers say the slump in Athabasca reflects a deal that garnered a large following among hedge fund investors, who were playing the stock for a pop on the IPO, and quickly sold their stakes. One investment banker whose employer was not in the selling syndicate said Athabasca attracted relatively little support from the buy-and-hold insurance, pension and mutual fund investors who typically will support a hot deal by purchase additional shares during the first days of trading.

"Unfortunately, this weakness will weigh on all planned IPOs," said an investment banker who was not involved in the Athabasca offering.