Canada, known throughout the world for its rich reserves of natural resources, faces a crisis with regard to its junior stock market, the TSX Venture Exchange. More than one news outlet has pondered the continued viability of an exchange whose flagship index, the S&P/TSX Venture Composite Index, sits lower than it did ten years ago, compared with a gold price that more than doubled from 2006 to 2011, and continues to sit much higher than where it was in 2000.
Can The TSX Venture Exchange Be Saved?
The TSX Venture Exchange is the result of a merger between the Vancouver Stock Exchange and the Calgary Stock Exchange, in 1999. It has been noted that this merger, seemingly dictated by poor market conditions, resulted about 10 years following the introduction of the internet, and that, more than 17 years after, the results expected by the merger have failed to materialize.
The price of Vancouver bullion, and gold worldwide, currently sits near $1,260 (CAD$1,640). Despite this seemingly lofty level, particularly when compared with prices below $400 in the early 2000s, “major changes” are said to be needed at Canada’s junior equity exchange.
A 2016 article, by Business In Vancouver, cited low commodity prices and over regulation as being responsible for the poor performance of the TSX Venture Index. Don Mosher, with B&D Capital, has stated that the exchange has many problems, that it gouges clients with exorbitant fees, and that it should never have been created with a “for profit” model in the first place.
At the time, then-president of the exchange, John McCoach, said that stakeholders have insisted that nothing be done to compromise the “integrity” of the TSX Venture, which could result in making an environment where it is “hard” to attract financing, to one where it is “impossible.”
Equity issuers point to fees running as much as $200,000 to bring the stock of a company public, and have asked for more cost-effective ways to raise capital. Most recently, the British Columbia Securities Commission loosened restrictions governing the issue of rights, an instrument that is often attached with private placements, and provides additional profits to investors, should the issuing company find success with its business plans, something that, objectively, appears to be a rare occurance on the TSX Venture Exchange.
A January 2016 meeting seeking public input on how to revitalize the TSX Venture Exchange was said to have been attended by 400 Canadians, with many described as “hecklers.” When the former president, John McCoach, told those gathered at the session that they do not yet have “this thing solved,” a heckler was reported to respond, “That’s apparent.”
Solutions offered toward saving the TSX Venture Exchange include increased automation, decreased settlement time, and the renaming of the stock of revenue-less companies to speck. Seventy percent of companies listed on the Venture are said to be engaged in mining or otherwise resource based.