MidtownGuy wrote:
Couple notes on the differences between the Venture and the TSX and the value of uplisting, maybe in ways that are not always considered.
PYR is in Rarefied Air; New Listings on the TSX Number Only 2 Per Month
So far in 2020, only 18 companies have been added to the TSX. 137 new listings have appeared in total in 2020 on the TSX, the vast majority of which are ETFs. The breakdown:
3 IPOs (companies never previously listed on any exchange)
15 graduations from the Venture exchange (PYR’s category)
114 ETFs
1 CPAC (a “capital pool company”, that is a company with management and capital on the search to buy a company)
4 “other” (likely funds or share classes that fall outside any of these categories)
Still One of 1600... But a Better 1600
There’s approximately the same number of companies on both exchanges, the TSX and the Venture, with 1600 or so on each.
If you’ve seen a bigger number, that’s likely the “listing” number. Companies are considered “issuers”, and that’s different than “listings”, which is the overall number of separate equities you can buy and trade on the exchanges.
The number of companies looks larger on the TSX because of all the additional funds (ETFs, etc) and “listings” from each company – sub-classes of shares and such that you can also buy from a company (BMO alone has about 15 separate share types you can purchase and trade, for instance). So on some forms you will read, it looks like the TSX has several hundred more companies, but those are the sub-class issues or additional listings from companies.
But most importantly, the big names are on the TSX: the banks, the large consumer comapanies, and the hot technology firms.
Financial Scale is 50 – 75X Greater
The TSX operates at a much larger level, in a number of ways:
Overall Market Cap of Exchanges:
TSX: $3.08Tn
TSXV: $60.8Bn
Average Market Cap of Listed Companies
TSX: $2Bn
TSXV: $26.9MM
Capital Access
So far in 2020, $28.9 billion has been raised on equity capital across both exchanges, TSX and TSXV. The difference can be seen in the average size of that capital per raise:
$60MM average financing size on TSX
$3.3MM average financing size on TSXV
Greater Volume, Less Manipulation
The TSX trades 3x more shares by volume on average, and 30x more individual actual trades.
I referenced in another post how low trading volume makes share price manipulation easier.
With movement to the TSX, both the increased volume and significantly increased regulatory monitoring of trade activities will reduce artificially low share price dips and days, as well as forced dips by short attacks.
Volume Traded (Billions of Shares)
TSX 89.3Bn
TSXV 37.6Bn
Number of Actual Trades Made
TSX 235.8 million trades
TSXV 7.9 million trades
Gaining Value From Analyst Coverage
Analyst coverage of junior exchanges like the Venture exchange is weak to entirely absent, but that all changes with uplisting to the TSX. From the TSX’s statistics, TSXV graduates listed on TSX are covered by an average of five analysts.
Good news, as general market evidence indicates that analysts create value by improving investor recognition for firms under their coverage, raising investor optimism, and increasing the demand for their common shares – often driving share prices above fundamental values.
Analyst coverage also adds value to firms by signaling the market – especially institutional investors – about a company’s performance and by increasing the company’s visibility to investors, even when they are simply using existing information (and not adding new information about these firms). In other words, the high profile of coverage analysts itself is often enough to drive a share price increase.
As a side note, for companies with newer, younger management teams especially (not the case with PYR, obviously), there is also some evidence that analyst coverage improves firms’ fundamental performance, playing a monitoring role whereby coverage can companies improve their attention to managerial and IR details, reduce opportunistic company behaviors, such as excessive executive compensation, while lowering asset mismanagement (there is also a competing view that analyst following may put excessive pressure on managers and encourage them to engage in short-sighted activities that boost short-term performance at the expense of long-term value ;).
Gaining Value From Access to Global Trading and Indices
From the TSX’s own data, over 40% of all trading on TSX comes from outside of Canada.
Perhaps more importantly, a TSX listing is a requirement for inclusion in the majority of indices and composites, such as the S&P/TSX composites and related ETFs.
Overall Market and Investment Community Focus For Companies Like PYR Is Greatly Improved on the TSX... and Less Focused on Mining
Much of the market interest on the TSXV is on the mining industry. It's partly why the Venture exchange was started in the first place before it evolved to where it is now, and of course in a historically resource-based economy like Canada’s, a mining focus is not unexpected.
But that enhanced focus changes dramatically on the TSX, which is more diverse and also more focused on Technology (the category in which PYR has listed) than the Venture exchange.
Existing Listings
On the venture exchange, there are currently 927 Mining listings and 162 Technology listings – an almost 6 to 1 ratio
On the TSX, there are 202 Mining listings and 52 Technology listings, a 3.8 to 1 ratio.
New Listings
There were 22 new Mining listings and 11 new Technology listings this year – a 2-1 ratio – on the Venture exchange.
On the TSX this year, there was 5 Mining and 4 Technology listings, a virtually even ratio.
Financing
If you look at the top 10 financings (private placements, public offerings, etc.) on the Venture exchange in Q3 of this year:
7 were in the mining industry
2 were in technology
1 life sciences.
In September alone, 7 of the top 10 were again mining.
But of the top 10 Q3 financings on the TSX:
4 were in technology (including the top 3)
2 were in real estate
1 in consumer products
1 in media
1 in industrial
1 in life science.
The overall point being, the Venture exchange is very much the domain of the mining industry, and the investors buying on the Venture tend to have a mining skew – which can lead them to miss or misunderstand R&D or maturing tech such as PYR.
The TSX offers a type of investor that is more well-rounded, more sophisticated (especially at the institutional level), and with a much improved focus on technology companies.
There are obviously many more advantages to uplisting, but this was just a few less obvious ones.