TSXV Performance

For investors and speculators, the TSXV has been an epic disaster for the last seven years. It has by
far the worst record of any stock exchange in the developed world.

It is misleading to reference the TSXV/S&P Index, which is as artificial and stacked for favorability as can be. Here’s how it is calculated. http://web.tmxmoney.com/assets/docs/indices/VXSC/Methodology_VXSC.pdf 

By its own admission, the TSXV uses only a certain restricted number of companies that meet specific market capitalization and liquidity criteria. Only approximately the top 10% of the companies can make the list.

What about the other companies? Conveniently, the TSXV keeps no records to indicate how abysmal the performance is of the mainly flat-lining slugs littering the landscape.

The largest single population can be classified as “zombies” – mineral exploration companies that have negative working capital and are in clear violation of Continuous Listing Requirements per Policy 2.5: http://apps.tmx.com/en/pdf/Policy2-5.pdf Table 2.1 is clear: absolute minimum $50,000 working capital plus some exploration activity in the past two years.

The TSXV/S&P Index can not, and can never, reflect the realities of the majority of listings because:

  • Stocks must have a five-day average minimum float-adjusted market capitalization of C$ 50 million as of the rebalancing reference date. No zombies!
  • Index constituents should have adequate liquidity. No zombies!
  • An index security cannot have had more than 10 non-trading days in the prior 12 calendar months, No zombies!

Last year, a list was prepared and presented to the TSXV listing 596 zombies with collective totals of over $2 billion in negative working capital and over $5 billion in “exploration assets”. The list, and the accompanying 44 comments that identified a number of contributory culprits, can be accessed here.

This year’s list is now being prepared. Early indications are that it may show more companies and more negative working capital than last year’s.

 

 

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