Investor Enthusiasm on the Rise for Early-Stage Crypto Ventures
TSX Venture Exchange (TSXV) is home to more than 300 Canadian and international small cap companies in the technology and innovation sectors, seeking access to capital to fund growth. Last year was a strong year for TSXV with over $11 billion of capital raised across 1800+ financings. Trading volume was also at the highest in 10 years, with more than 64 billion shares traded.
The 2022 TSX Venture 50Ⓡ is a ranking of the top 10 performing companies from each of the five industry sectors on TSXV. This year’s rankings show a different perspective than previous years and how global small-cap markets are evolving. For example, the average company on the list is 71% larger (based on market cap) than last year and 200% bigger than 10 years ago. Four companies across three sectors on the TSX Venture 50 have market caps of greater than $1 billion, which is a new record.
According to the Government of Canada, the technology sector in Canada generated $230 billion in revenue in 2020 and makes up 5.1% of GDP [1]. The sector has weathered the pandemic better than other industries and continued to grow despite economic uncertainty. Technology companies featured on this year’s TSX Venture 50 follow this trend, seeing their share price rise by 156% and market cap increase by 309%.
Historically, the TSX Venture 50 rankings were driven by smaller cap companies that saw big growth spurts. But that is no longer the case. The average market cap of technology companies on the list this year is $312 million. Combined, the top 10 high-performing companies created $3.12 billion in market capitalization and $4.9 billion in value from trading.
The top-performing technology company on the TSX Venture 50, Bitfarms Ltd., reached a market cap of $1.2 billion in 2021, and is also one of two technology companies to make the list in 2021 and 2022. Four of the 10 technology companies on the 2022 TSX Venture 50 serve the blockchain and cryptocurrency industry.
Changing Face of Technology Companies
Cryptocurrency and blockchain is an emerging industry in Canada and around the world, estimated to be worth US$3 trillion [2]. Given the popularity of cryptocurrencies, investors have become more comfortable with investing in early-stage ventures that are innovating in the decentralized finance economy.
In February 2021, Toronto Stock Exchange (TSX) announced the world’s first bitcoin exchange traded fund (ETF), designed to expose investors to the leading cryptocurrency by investing directly in physically-settled bitcoin. Closed-end listed funds also offer investors exposure to crypto markets but minimize security concerns. In 2021, $7 billion in equity financing was raised through crypto ETFs listed on TSX.
There is also a shift occurring in the types of ventures seeking capital to fund specific initiatives or prototypes, particularly in the technology sector. Founders of early stage companies could utilize TSXV’s Capital Pool CompanyⓇ (CPC™) Program to go public within a reasonable timeline while controlling their costs and gaining access to professionals with experience in public markets.
The CPC Program is a unique financing vehicle offered exclusively by TSXV. It is a two-step introduction to capital markets, streamlining the process for early-stage, private companies to go public and access capital.
Thirty-two percent of all TSXV companies that graduated to TSX are former CPC companies and have raised $75 billion in equity financing. In this year’s TSX Venture 50, 10 technology companies started as a CPC.
The technology sector in Canada and internationally continues to grow, attracting investor interest and using innovation as a way to grow. The performance of technology companies on this year’s TSX Venture 50 demonstrates that the small cap section of the industry has huge potential to grow and reach unicorn levels.
The TSX Venture 50 is a ranking of the 50 top-performing stocks on TSX Venture Exchange selected based on three equally weighted criteria: trading value, one-year share price change; and one-year market capitalization change as of December 31, 2021. See the full rankings and methodology at tsx.com/venture50.
* Unless otherwise noted, all data is sourced from the Market Intelligence Group of TMX Group as of December 31, 2021.
[1] 2020 Canadian ICT Sector Profile. Government of Canada. 2021. https://www.ic.gc.ca/eic/site/ict-tic.nsf/vwapj/ICT_Sector_Profile2020_eng.pdf/$file/ICT_Sector_Profile2020_eng.pdf
[2] Matkovskyy, Roman. “ Five cryptocurrency trends for 2022,” Global Investor Group Website. January 17, 2022. https://www.globalinvestorgroup.com/articles/3697849/five-cryptocurrency-trends-for-2022
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