Why list on the TSX?

Why list on the TSX? The advantages of resource-based exchanges the TSX and TSX-Venture.

 

Many companies are going public, especially in Canada where capital markets are among the strongest worldwide. But why go public in the first place, and what are the benefits and strengths of Canadian exchanges? Depending on your sector and your strategic objectives, listing can be the right move.

If you’re going to list, do it on the TSX or Venture exchange. 

There are many benefits to taking your company public, especially the opportunity for capital and financing opportunities. When you are public, your company is equipped with equity financing that can help grow your business, whether you’re planning to expand your operations or acquire another business. When issued, public shares expand your shareholder base and then there are all the opportunities for secondary equity financings and private placements. 

There are also more favourable conditions for issuers with banks in most scenarios—confidence is something that money can buy when you are a public company. 

In addition, by going public you are making your company more visible. This is especially important for companies that depend on public confidence when operating in fields that are regularly scrutinized, such mining and oil and gas, for environmental reasons. Public companies are more visible, and can promote key messages to stakeholders through publicly filed documents. Analysts covering your sector can help you gain credibility—something many private companies have to rely on word-of-mouth for. Investors, through this public space, are usually more diversified and can increased demand for your company’s shares—ultimately increasing value. 

There are other plusses when it comes to listing, including the ability to use stock plans to motivate employees, and using shares as an acquisition currency.

Fees:

Listing fees, according to the TSX website, are as follows:

	Toronto Stock Exchange	TSX Venture Exchange
Listing Fees	$10,000 - $200,000	$7,500 - $40,000
Accounting and Auditing Fees	$75,000 - $100,000	$25,000 - $100,000
Legal Fees	$400,000 - $750,000	$75,000+
Underwriters’ commission	4 - 6 %	Up to 12 %

 

Other fees to consider include securities commission fees, transfer agent fees, costs for investor relations consultants and materials, etc. There are many resources out there to help private companies, but they will cost (usually IR services are hired on retainer, for more information visit www.equicomgroup.com). 

Why Canadian exchanges are better:

Canadian exchanges have proven very successful for thousands of companies. According to the TMX Group, a Canadian company listed on either the TSX or TSX Venture Exchange will garner more analyst coverage than a Canadian issuer listed only on a U.S. exchange: “Analysts cover only 53 per cent of Canadian issuers listed solely on a U.S. exchange, with an average of three Canadian or U.S. analysts covering these issuers. For issuers listed on both Toronto Stock Exchange or TSX Venture Exchange and a U.S. exchange, 86 per cent received coverage by an average of nine analysts each.”

Listing on the TSX means that an issuer is eligible to be included in the S&P/TSX Composite Index, as well as assignment to S&P/TSX sector indices. Being included in an index contributes to raising visibility and profile and can improve awareness. Other benefits include exposure to the Canadian institutional investment community, attract more market support. The exchanges are also very well regulated, guaranteeing fairness in trading. 

Best markets for resource companies:

Greg Ferron, Senior Manager, Global Resources, TSX and TSX Venture Exchange spoke recently to a group of delegates at an African mining seminar, to explain why listing on a Canadian exchange is the best way to go for companies. Though the AIM exchange was traditionally the “hub for mining activity” according to Ferron, the TSX is widely regarded now (and the TSX-V for explorers) as the place to be if you are going public. “We’re seeing activity coming from other parts of the world and many companies bringing new assets to Canada—that is all related to the confidence people have in our market now,” Ferron explained.  

Ferron attributes the success of the exchanges to liquidity. “Management teams are looking five to 10 years ahead and they want to be on a platform that will support their company, they want to be on one that they can raise equity. The TSX and TSX-V have good liquidity and good valuation,” he continues.  

Globally, companies are recognizing that Canada’s resource-rich economy provides the exchanges with a level of stability and strength that is not seen elsewhere. Not to mention the Canadian financial system is one of the strongest in the world. The Toronto exchange is one of the few that covers all factors of the mining industry.

“Toronto exchanges list at all stages of the mining business, from exploration to production, most commodities get financed in our markets.” The exchange also offers the capacity to have companies graduate from the junior to the main board.

For larger companies and small, the mining industry is looking to Toronto exchanges to provide those opportunities that come with going public. According to Ferron, 40 per cent of trading flow comes from the U.S., and the “same type of interest is coming from London and Asia—showing the confidence investors have in companies listed on the venture exchanges.” 

The Toronto exchanges are home to 55 per cent of the world’s public mining companies. 

The fundamental advantages of listing a company with the TSX are obvious, but if you need more proof, just ask the hundreds of companies trading—stay tuned for more conversations about market success with investor relations experts in the next issues of IRJ.