Four ways to fix the ‘broken’ TSX Venture Exchange

New Financial Post article by mining reporter Peter Koven discusses the troubles of the TSXV and zombies. I am mentioned.

Link here:  Four ways to fix the ‘broken’ TSX Venture Exchange


A broader and more esoteric concern is the potential damage done to the Venture brand after years of investor losses and falling liquidity. To many people, it simply isn’t as strong as it used to be.

One of those people is Tony Simon, co-founder of the Venture Capital Markets Association and a frequent thorn in the side of TMX management. His view is that the Venture’s primary strategy has been to maximize listing fees, and as a result, it has allowed too many low-quality companies to maintain listings.

Earlier this year, he called for a mass delisting of about 600 “zombie” resource firms that have negative working capital and no clear ability to create value for investors. He also said the Venture should not have allowed capital pool companies to proliferate so much and distract attention from more active firms.

“Let’s say you go to a restaurant and there’s 1,500 things on the menu, and if you’re lucky, only 50 per cent of them will give you diarrhea,” Simon said, in reference to the Venture.

“You’d be much happier going to a restaurant where they only have 10 things, but they stand behind them all. And if the prices were a little higher, you wouldn’t mind because they’re quality.”

Of course, investing in the Venture is high-risk by design, and most people aren’t as critical as Simon. But no one would dispute that a revitalization is a welcome idea.

Here’s why there are 600 zombie companies on the TSX/TSXV

44 comments for TMX Group, directors, auditors, and regulators

These 44 comments on TSX- and TSXV-listed natural resource companies, and the accompanying schedules, have been prepared with the objective of identifying some of the contributors to the many problems faced by junior exploration companies and their investors, and hopefully convincing those responsible that there is a better way to do things.

When close to 600 companies make a list because they clearly are non-compliant with Continuous Listing Requirements of the TSXV (Policy 2.5, Heading 2.1), it is reasonable to assume that a troublesome pattern has developed.

The comments are designed to give enough facts and generate enough ideas so that people who might jump to a quick conclusion have a chance to be exposed to possibilities that are not so obvious.

There are several targets:

  • Some will blame the companies, or at least their directors and promoters.
    Others will think it is obvious – TMX Group management and directors who have the power to demand compliance with, and an obligation to follow, their own rules but choose not to.
  • Some are going to take a hard look at the auditors and the Canadian Public Accountability Board and question whether true professional standards are being met.
  • Some will question whether the securities commissions are fulfilling their mandates.

Please note that all the people listed above make money out of the industry, even while the individual companies and their stakeholders absorb the losses.

All this might be seen as a recipe for a great Canadian financial horror story:

  • 600 non-compliant companies,
  • over $2 billion in negative working capital,
  • over $5 billion in questionable exploration assets,
  • illiquid markets,
  • impressively worded mandates from organizations that seem to exist for investor protection, and,
  • to use an old pun, investors getting the shaft.

Continue reading “Here’s why there are 600 zombie companies on the TSX/TSXV”