The TSX Group came to Houston on June 26 to drum up business for the Toronto Stock Exchange and the TSX Venture Exchange among the city’s energy community. The Canadians discussed the advantages of small- and mid-cap companies registering on one of the Canadian exchanges as opposed to an American exchange or London’s AIM, which has been a popular place for some US-based companies to hold their initial public offerings for several years now. TSX Group says its exchanges offer significantly greater liquidity and aftermarket support than do many of its competitors.
Addressing a crowd of mostly oil and gas executives, attorneys, and members of the financial community at the Houstonian Hotel, Kevan Cowan, president of TSX Venture Exchange, and Rik Parkhill, executive vice president of TSX Group and president of TSX Markets, provided an overview of the exchanges and how they are home to 50% of the world’s publicly listed energy companies and 60% of global mining companies.
TSX Group also operates NGX, a Calgary-based exchange for the trading and clearing of natural gas and electricity contracts.
Earlier this year, TSX announced an alliance with Atlanta-based Intercontinental Exchange (ICE) with the intent to launch a Canadian derivatives market that will compete with the Montreal Exchange. It will also partner with New York-based International Securities Exchange Holdings (ISE), which may be a precursor of future partnerships between the exchanges on other projects. Future partnerships with ICE in Europe and Asia are also a possibility, says a spokesman for TSX.
Part of the Canadian group’s strategy is to attract US companies to list on the exchange, and a huge incentive is that Canada’s government regulations are less onerous than those in the US. The visits to Houston and Dallas, in particular, are aimed at promoting the Canadian exchanges to the oil and gas industry.
“Our size and strength always surprises people,” said Parkhill. “In all, 438 oil and gas companies are listed on TSX exchanges, which represent about 50% of all public oil and gas companies worldwide. And we have more US listings than any exchange outside the United States.”
Citing statistics compiled by the World Federation of Exchanges, Parkhill added that TSX Group is home to more companies than any other exchange in North America and has about 9% of global listings by number of companies.
Cowan noted that TSX is “one of the best markets in the world for raising public equity capital” by total dollar amount raised. The WFE ranked TSX fifth globally in this category in 2005 and 2006.
The reach of the Toronto Stock Exchange and TSX Venture Exchange extends internationally, providing access to capital for more than 3,800 companies. In all, global market capitalization for listed companies totals approximately US$1.8 trillion, said Cowan.
The Canadian public equity marketplace is ideal for small- and mid-cap companies, said Parkhill. Comparing total initial public offerings in Canada and the US, he noted that the average amount raised during an IPO in 2006 in US markets was US$197 million.
By way of contrast, the TSX Group’s average amount raised was US$34 million in 2006. This breaks down to US$81 million on the Toronto Stock Exchange (senior market) and US$2 million of the TSX Venture Exchange, which is home to smaller start-up companies.
Keynote speaker Dr. Donald Kramer, CEO of Houston-based Northstar Healthcare, said that his company listed on the Toronto Stock Exchange in May because, “There was no interest in New York in companies with less than $300 million market valuation. In Toronto, our $148 million valuation was oversubscribed and there is ample post-IPO visibility.”
Kramer added, “The regulatory environment in Canada is not heavily burdensome as it is in the US, and we have found that Toronto is a good place to do business. As a public company, we now have enhanced access to capital.”
With regard to analyst coverage, Cowan noted that there is a large analyst community that follows the TSX exchanges. “About 83% of oil and gas companies listed get analyst coverage. Canadian oil and gas analysts also provide coverage for a broader range of companies [than do US analysts],” he added.
“We think there is a lot of value in going public on the TSX and TSX Venture Exchanges,” concluded Cowan.
