Most of the world’s senior stock markets restrict public listings to companies that have advanced far beyond their early stages of development. This makes it more difficult for smaller companies to access public investors, and investors have to wait to participate in a company’s development until it’s well underway.
The two-tiered structure of Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) challenges this convention. With a listing on TSXV, early-stage companies gain exposure to public equity markets even with assets of as little as $750,000 and while their operation may still be pre-production.
Among global exchanges, TSXV is widely reputed to be the world’s leading venture capital marketplace.
“TSX Venture Exchange is a vibrant, well-regulated market with an impor-tant mandate to mentor newly-public companies,” says TSX Venture Exchange President John McCoach, “and also provides a cost-effective stepping stone for international companies looking to list in a quality North American market.”
In the first quarter of 2012, nine companies graduated to TSX from TSXV, up from six companies in the first quarter of 2011.
With a listing on TSXV, an early-stage company benefits from a marketplace – including the exchange, professional advisors, regulatory model and investor base – that understands venture companies. Once the company has grown to meet the listing requirements of the senior exchange, it may choose to graduate to TSX.
A listing on TSX can enhance their liquidity on domestic and international markets, and provides access to a wider range of individual and institutional investors.
Since 2000, over 500 companies have graduated to TSX from TSXV. Of the companies listed on TSX with a market capitalization of more than $1 billion, 17% graduated from TSXV, including almost one in four companies in the S&P/TSX Composite Index. The success of these companies is clear evidence of the value of this unique Canadian model, a model that works as an incubator of sorts for smaller companies with big ambitions and a viable plan.
For investors, the uni-que two-tiered structure of TSX and TSXV enables them to capture opportunities at an early stage of a company’s development. Currently they can choose from more than 2,200 companies listed on TSXV – companies with aspirations to grow from their R&D and prototype stages to commercialization, production and expansion. Performance may be volatile and results unpredictable, but for investors who want to participate in a company’s development from its first steps into its maturity, TSX and TSXV enable them to do it.