Canadian Securities Exchange CEO Discusses State of Canadian MicroCaps

Posted on July 26, 2017 by PubCoCEO Staff Leave a comment

Earlier this month, CEO of the Canadian Securities Exchange, Richard Carleton, sat down with Peter Murray of Kiyoi Communications, to discuss the performance of the CSE in the first half of 2017 as well as to get the CSE’s perspective on a number of issues related to Canadian public markets, the evolving cannabis sector and innovation at the CSE.

The first question Murray asked was about the state of the Canadian microcap sector.

Murray asks: “Media outlets have published several articles recently on the demise of the microcap issuer, pointing to reductions in IPO activity, capital raised and issuer numbers. The CSE is doing quite well servicing this segment of the market these companies. What are your opinions on the state of the microcap sector?“

Carleton says: “There are different ways to assess the health of the sector, some of which are pretty encouraging. One of the concerns expressed in an article published by the Globe and Mail recently was that the number of companies listed on Canadian exchanges has declined quite considerably. What they did not refer to was that there are some 320 companies listed on the Canadian Securities Exchange, and this was not the case eight or nine years ago.In other words, some of those missing companies are not missing at all – they are listed on the Canadian Securities Exchange.

That said, we’ve obviously gone through a prolonged slump in the mining and oil and gas exploration sectors. This has an impact on the overall health of the Canadian markets because Canada has been very good historically in terms of creating large numbers of these types of public companies.

The bottom line is that public capital is always there, but raising that capital is never going to be easy. Quite frankly, it is not supposed to be easy. But with price weakness in some of the commodities that underpin the value of Canadian resource companies, applying the model of raising public funds for pre-revenue companies has been a bit of a struggle.

Fortunately, the tremendous growth in the legal cannabis space since the spring of 2014 has served as a counterbalance. We are increasingly seeing old fashioned IPO-type deals where companies are raising tens of millions of dollars, and even into nine figures, in ways that remind one of the good old days, with Canadian investment dealers conducting a wide distribution on behalf of the issuer.

So, what we really have is a kind of dichotomy where the traditional Canadian small-cap space continues to suffer a high degree of stress. But the sunrise industry that is the legal cannabis space in Canada and the United States has attracted a lot of attention from investors and the investment dealer community.“