The President of the TSX Venture Exchange has put the kibosh on speculation that hundreds of small-cap issuers will soon have their shares delisted.
“I can guarantee that 500 companies are not going to disappear,” said John McCoach.
Rather, he said it’s likely that only 38 companies will be delisted this year. That compares to 27 in 2012, and 34 in 2011.
McCoach made the pledge while he was moderating a TSX Venture Exchange townhall meeting in Vancouver Monday that was set up to promote discussion about issues that are contributing to a bear market for risky small cap stocks.
Issues contributing to the bear market include lack of significant new mineral discoveries and a flight to safety as investors react to global uncertainty and declining commodity prices, particularly gold.
As junior companies struggle to raise money for mineral exploration, an over emphasis on regulation is driving up to cost of doing business in the sector, the well-attended meeting was told.
It is a scenario that prompted investment newsletter publishers, such as John Kaiser, to predict that hundreds of small cap companies will soon disappear from public markets in Canada.
In a recent interview, Kaiser said that of the 1,800 junior resource companies that he covers, as many as 524 have less than $200,000 in working capital. “These are companies that typically trade in Canada on the TSX and TSX Venture Exchange,’’ he said.
But McCoach said he is confident that the actual number will be 38 in 2013. This is because 90% of the exchange’s 2,245 issuers have already paid their sustaining fees, he said.
Speaking from an investor’s point of view, Sprott Global founder Rick Rule said mineral exploration is a capital intensive, cyclical business and the market is starved for results.
However, he said the recent success of companies such as GoldQuest Mining Corp. (TSX: V.GQC, Stock Forum), Reservoir Minerals Inc. (TSX: V.RMC, Stock Forum) and Africa Oil Corp. (TSX: V.AOI, Stock Forum), means that the situation is far from hopeless.
“Give us a reason to fund something and we will fund it,’’ he said.
Rule was one of three panelists who participated in Monday’s townhall meeting. The others were Kevan Cowan, President of TSX Markets and Group Equities, and Fiore Financial Corp. executive vice-president Gordon Keep. Also participating was Paul Bourque, Executive Director of the British Columbia Securities Commission.
There was general agreement Monday that the TSX Venture is perhaps unique and remains a top vehicle for resource companies who are going out into the world and raising new capital.
“This exchange doesn’t really have any competition,’’ Rule said.