TSXV 101: A Deep Dive Into the Small and MicroCap Marketplace
Toronto Stock Exchange ranks as one of the world’s most elite marketplaces and boasts an exceptional global reputation. But few global investors are aware of its cousin exchange, TSX Venture Exchange (TSXV).
What Is TSXV?
TSXV is a public venture marketplace for small companies that lack the size or resources needed to list on the premier Toronto Stock Exchange (TSX).
TSXV exclusively serves small and early-stage companies that need access to public capital to finance their growth. Companies can raise capital in the private market (such as from venture capital firms) but alternatively they can choose TSXV, to gain a foothold in the public market.
Such companies typically seek to raise smaller amounts of financing, in the range of $500,000 to $20 million. TSXV listed companies can “graduate” to the flagship TSX once they satisfy the larger exchange’s more stringent listing requirements. Benefits of switching exchanges include greater visibility, superior access to institutional capital, and enhanced liquidity.
Investors can benefit from “ground-floor” opportunities by buying shares in a TSXV company at an earlier stage in the company’s life, when it commands a cheaper valuation.
By contrast, companies that require access to more than $20 million and/or can show a strong performance track record would choose to list directly on TSX.
Facts and Figures
TSXV operated as the Canadian Venture Exchange (CDNX) until 2001 when it was purchased by TSX and rebranded as TSXV.
Investors correctly describe TSXV as the equivalent of the American NASDAQ Small Cap exchange or OTCBB exchanges.
As of December 31, 2019, TSXV was home to 1,673 companies that were worth $45 billion, with a median market cap of $5 million.
Since TSXV’s formation, more than 670 companies have graduated to TSX. In fact, nearly one in five S&P/TSX Composite Index* constituents can trace their roots to TSXV.
By segment, 36% of all Technologies companies listed on TSX graduated from TSXV, 13% of Clean Technology and Renewable Energy companies are graduates, and 55% of Life Sciences companies are graduates.
From 2000 through 2019, a total of 295 Mining companies graduated to TSX, and more than 150 Energy companies graduated over the same period.
Success Story: Canopy Growth
Cannabis company Canopy Growth is one of many success stories that show how a small-cap company on a junior exchange can grow to become a $10 billion global giant.
Canopy, formerly known as Tweed, became a public company on TSXV on April 4, 2014. The stock opened for trading at $4.60 but closed that day at $2.59.
On June 9, 2016, Canopy confirmed it had received conditional approval to graduate to TSX ─ and did so a few short weeks later.
"Graduating to TSX, and to be the first in the sector to achieve it, is a major accomplishment for our team," Bruce Linton, ex-Chairman and CEO of Canopy Growth said in a press release to mark the occasion. "The sector is growing rapidly, and we have focused on maintaining our leadership position as it grows. Listing on TSX will bring even more visibility and credibility as we pursue domestic and international business."
At the end of 2020 the stock was trading above $30, giving day one investors a potential return of more than 1,000%.
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