The final stop on the TMX cross country roadshow was hosted at the Pan Pacific in Vancouver on January 28, which is also home of this year’s Roundup Conference. The whole building is buzzing this week, and this 300 seat Town Hall meeting chaired by the TMX was standing room only.
A full contingent of TMX leadership was in the room, and I was reminded a little bit of that feeling back in high school right before a fight was going to breakout. John McCoach, President of the TSX Venture, acknowledged that they had expected this session to be busier and more spirited than similar events already held in Montreal, Toronto, and Calgary, and the room did not disappoint.
The TMX published a white paper in December, titled “Revitalizing Canada’s Public Venture Market”, and the point of this tour was to table their findings in front of industry stakeholders, and to walk through the proposed changes. The first catcalls came out when Nicholas Thadaney, President and CEO, Global Equity Capital Markets, stated that despite all the challenges, the Canadian markets are still the best in the world as far as supported the greatest number of resource companies, raising money for resource companies, and helping early stage companies grow – “Not anymore!” rang out several times. Mr. Mccoach is very cool under fire, and he did manage to get through their presentation and handle all questions in 2 hours.
The TMX acknowledges that they can’t fix all of the Venture market’s ills on their own, but their focus is to reduce Issuer administration and compliance costs, increase capital and liquidity, and diversifying. Diversification means working towards a healthier mix of companies on the TSX-V (think technology), but that particular message doesn’t really resonate with companies already listed.
There were a couple major themes that dominated the ensuing discussion:
Costs –The TMX is proposing that they can simplify some of the requirements around escrow, sponsorship, shareholder approval for inactive companies, etc, which should reduce the amount of time and money spent by Pubcos to satisfy the rules. It kept being brought up that the exchange was not addressing the actual listing fees, which Mr. Mccoach acknowledged.
Ownership - One of the polled questions was whether Issuers would prefer that the exchange revert back to a mutual or non-profit model like it used to be. It was stated that much of the sector’s ills can be traced back to the switch to become a “for profit” entity, to which John pointed out that the change happened in 2001, and we had seen 3 bull markets since then, so obviously that change didn’t kill the industry. Mr. Mccoach has a sense of humour, too – when it was pointed out that the TMX is squeezing small cap listings in order to make money for the 4 big banks that own it, John dead panned, “It’s actually 6.”
Rules - One valid point that everyone seemed to agree to was that it seems ludicrous to treat early stage resource companies in the exact same way as more mature big board players. Reporting requirements and legal costs are far more easily absorbed by big multi nationals than venture companies. Or consider “shorting” – while an institution deciding to short a massive gold company may have some legitimate
value in a healthy market, the crowd seemed unanimous that being allowed to short start up exploration companies is crazy. “Kill the uptick rule”, was definitely a takeaway on the day.
“Where are the regulators?!” – kudos to the TMX for this initiative, and regardless of whether you think their initiatives go far enough, or are happening too late, they are taking this bear by the horns (you know what I mean) and honestly addressing hot button issues. These Town Hall hosts don’t set exemption and investment rules, and this session glaringly lacked any representation from either government, IIROC, or the provincial regulators. John was pointedly asked many questions about rules that the TMX may be able to influence, but definitely cannot change, and there was a strong undercurrent of frustration directed at these missing groups. A similar session that included them would be spirited, sure, but it would undoubtedly be welcomed.
As John Mccoach said “the Venture exists to get early stage companies access to capital so that they can grow” and that any exchange is “either a point of friction, or attracts capital”. Everyone in that room was on the same page here – while it is obvious that commodity prices aren’t cooperating, there are challenges raising capital that are threatening a sector that is counted on to finance international projects and to create domestic jobs. The TMX ties its fee structure to successful financings, so its priorities should align with Pubcos’. To view the TMX whitepaper, click
here.
All 3 of the current private placements (EEstor, Medifocus, and Movarie Capital) in the
Stockhouse Deal Room are TSX Venture companies, and they are raising a combined $8.8M in a challenging market. Stockhouse will continue to report on any significant progress towards streamlining investor access to the venture space.