J. Ari Pandes is an associate professor of finance and an associate dean at the University of Calgary’s Haskayne School of Business. Michael J. Robinson is a professor emeritus in entrepreneurship and Innovation at the University of Calgary’s Haskayne School of Business.
Through a series of events, in 2001, all of Canada’s main regional stock exchanges were merged into what is known as the TSXV, which continues the tradition of supporting the early-stage ecosystem in the country. At its peak in 2002, the TSXV had a total of 2,504 public listings . Much like the trends in the senior market, total listings on the TSXV have also been on the decline, with 1,670 in 2023.
This entry point to the TSX is not trivial: in 2007, there were 72 graduations – the highest ever. There were only 12 graduations in 2023. However, these numbers still dwarf the number of debuts on the TSX through an IPO. Our research has shown that the long-term performance of companies that graduate from the TSXV to the TSX are superior to companies that directly go public on the TSX.
By liberalizing the private markets, regulators and policy makers have created an uneven playing field between junior private companies and junior public companies. For example, most of the tax incentives that are available to the former are not available to the latter, even though many of the companies in the two markets are of the same size and scale.
Unfortunately, studies of the return performance of the TSXV understate the returns potential, since companies that graduate from the TSXV to the TSX and continue their strong growth are dropped from the TSXV index after they graduate. Developing an index performance measure that includes the gains to TSXV graduates would be helpful in addressing this bias, as well as promoting the success stories of companies listed on the TSXV.