Mining has for a long time served as the anchor of Canada’s junior stock exchange, the TSX Venture Exchange.
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But as pretty much everybody knows, this isn’t the best time to be considered a junior miner looking for exploration capital. Small wonder, then, that the Venture recently published a white paper seeking comments on the number of ideas to “revitalize” itself and expand liquidity.
The data reveals the size of the issue. At the peak of the boom in 2007, miners raised $4.28 billion through 418 equity offerings on the TSX-V. In 2015, junior miners raised only $175 million through 29 deals. For a lot of yesteryear decade, mining issuers composed at least 40 percent of listings around the junior exchange. Last year, they provided up only 10 per cent.
In some ways, the TSX-V is really a victim of its own success. For years, it marketed itself as the world’s paramount exchange for anyone needing risk capital for junior exploration projects. Then your boom went bust.
“You develop a business on a platform like this so when the commodities cycle pulls a 180 and goes the other direction, you are with many different rotten fruit on the very big tree,” says Richard Fridman, someone with Davies Ward Phillips & Vineberg LLP in Toronto.
Mike Amm, a partner with Torys LLP in Toronto, says the TSX-V’s white paper has some very nice ideas that may make listing or raising capital easier for issuers. But loosening listing requirements or streamlining the procedure only helps if these are the things that are keeping companies from seeking to the exchange to boost equity or which are preventing people from purchasing TSX-V listed stocks.
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At no more the day however , investors just don’t want to put profit the mining sector at this time, Amm says. “So there’s not really much that the TSX-V can do to improve the problem until commodity prices improve.”
Little surprise, then, that certain from the three main strategies described in the TSX Venture’s white paper is to diversify its stock listings from resources. It’s also taking a look at reducing administrative and compliance costs and enhancing liquidity.
Rob Murphy, another partner with Davies Ward, says there’s some value in lessening some compliance costs — in as far as the exchange can. Securities regulators set the majority of the compliance rules. “They really have a more limited hand to experience with regards to reducing compliance costs. And I’m not arguing they should reduce compliance costs. There’s just less they can do.”
The TSX-V’s white paper lists several ideas, for example revising the rules on when shareholders must approve certain events or transactions involving inactive companies. A meeting may cost between $20,000 and $50,000, so eliminating the need for perfunctory gatherings could save your time and cash.
You end up with many different rotten fruit on the very big tree.
Eva Bellissimo, an attorney with Cassels Brock & Blackwell LLP, says active companies also need flexibility, speed of execution and creativity. “What about active companies? They’re those we need to help save.”
At the same time frame, lawyers recognize the exchange needs to keep some rules in place to preserve its logo and distinguish itself from competition from places like the over-the-counter market in the U.S.
“It’s an excellent needle they’re attempting to thread by appearing more hospitable to issuers while also not compromising the integrity from the market by reducing regulations,” says James Clare, Bennett Jones LLP.
But ultimately, the TSX-V is simply a market, much the same because the supermarket, observes Henry Harris within the Toronto office of worldwide firm Gowling WLG. “A stock exchange does not produce the product that’s in stock. Should there be problems in producing interest in the merchandise, that’s not directly the purpose from the exchange.”
The TSX-V recognizes within the white paper it needs to create some positive awareness about itself and showcase a number of its listed companies to investors.
This is an important part of the mix, Harris says. “Make that marketplace or supermarket an excellent place to become. Meanwhile, lessen the regulatory burden of listing and raising money by continuing to keep fees down.”
The TSX-V recently held “town hall” meetings in Vancouver, Calgary, Toronto and Montreal to collect feedback on the white paper. It says it found those meetings so helpful that it’s planning several more gatherings in smaller communities across the nation. Which means you should have an opportunity to share your views, too.
dhasselback@nationalpost.com
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