Battered by commodity price weakness, a drop off in investor liquidity and a stream of companies unable to effectively progress projects, the exchange has been travelling all over Canada and Europe consulting on its plans to “revitalise” the TSXV.
Effectively admitting the current system is broken, this tour has given attendees a platform to air their grievances and advise the bourse of how to proceed.
It takes a brave exchange to open up like this. It takes a clever one to separate the good ideas from the bad.
It is generally accepted many of the issues holding back TSXV trade were not a problem during the boom – the S&P/TSX Venture Composite Index trebled from January 2003 to July 2007 – but when the cycle shifted, holes started to appear.
To try and close some of these gaps, the TSXV, which is heavily skewed towards natural resources, put out a whitepaper in December detailing plans outlining intentions to make a “positive, tangible impact in three important areas”.
First, the TSXV has committed to reducing administrative and compliance costs in a “meaningful” way without “compromising” investor confidence.
Automated online filings for private placements are already in place, while policy revisions to eliminate the general requirement for sponsorship are being drafted. The TSXV is also looking at recognising and providing benefits for active and proven directors.
Second, as part of expanding the investor base for TSXV-listed companies and enhancing liquidity, the bourse is arranging more than 10 investor days this year for listed entities, introducing a market making programme and trying to reduce barriers for US investors.
On the third front, plans to diversify and grow the stock list included hiring sales representatives in key growth hubs, putting on the charm offensive for private equity and venture capital firms looking for exit strategies, and advocating politicians for early-stage public company support.
Since the whitepaper was issued, the Venture index has risen 32%. An 18% jump in the gold price might have helped, but McCoach thinks the proposals have also played a part.
“We’re doing literally 23 different things to try to revitalise the market. I think that gives people hope,” he told Mining Journal.
Even with positive momentum behind it, the exchange has an uphill battle on its hands.
The initiatives do not cover the variety and breadth of issues investors and companies have with the way mining and exploration trading is conducted in Canada.
Stock shorting, the cost and time involved in maintaining listings, executive compensation, transparency, ‘zombie’ companies, the four-month hold period, NI 43-101, share consolidation, SEDAR. You name it; it was discussed at an event in London earlier this month.
""We’re doing literally 23 different things to try to revitalise the market. I think that gives people hope"
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Not all of these issues are under the TSXV’s control.
For example, it cannot reinstate the ‘uptick rule’ to ease short selling, or reduce the four-month hold period for private placements. These are regulator-led decisions.
It doesn’t mean to say these points will be ignored.
“I intend to take those messages to the securities regulators and to the investment industry regulatory industry in Canada,” McCoach said.
The TSXV has a record when it comes to lobbying the regulators for changes, having recently had some success with exemptions for rights offerings, but many investors think they need to push harder.
Not all of the policies the TSXV is looking to implement have hit home – John Kaiser has picked holes in many of them in his online blogs – but the bourse is at least trying. In its March progress report it added two different initiatives – related to lobbying regulators on short selling and filing procedures following previous town hall meetings – and McCoach said “we’re open to any and all ideas”.
And, those so-called ‘zombie’ companies – stocks with no or negative working capital without the facility to move projects forward – already have a place to be demoted to that many outside of Canada may not appreciate. Any investor spotting an H or K suffix next to a TSX issuer’s code has seen a stock that has been demoted to NEX, a platform for companies that fall below the bourse’s listing standards. This platform allows the issuer time to get their houses in order before, hopefully, re-emerging onto the TSX or TSXV.
Some 98 mining companies were demoted to NEX last year, with six being promoted back to their former homes.
Kaiser has argued NEX is just a way for the bourse to retain listing fees, but the TSXV’s whitepaper has acknowledged there will be more stringent rules on these companies – which could lead to more delistings. As it stands, the system at least distinguishes between performers and non-performers.
Most of the plans the TSXV has revealed will be in place before the year is out, but the revitalisation goes beyond December 31.
Commodity prices will have a big say on if trade surges once again, but the bourse has at least admitted there is a problem and it is willing to change.
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