CSE breaks records as new technologies driven by cannabis lure investors
There’s no surprise that The Canadian Securities Exchange (CSE) is booming. We live in an era of disruptive societal and technological change that is delivering wealth to innovative entrepreneurs.
The CSE set out its stand in 2003 to take on the TSX Venture Exchange as a public exchange to allow entrepreneurs to raise finance and mitigate risk. The TSX executives who founded the CSE knew that TMX Group’s 2001 takeover of the Canadian Venture Exchange to create the TSX Venture Exchange (bringing the TSX and TSXV under one roof) provided a need for competition. That foresight is paying off now.
It’s even less of a surprise that there are a few select new industries that are driving trade volume growth. The main pillar is cannabis. Canadian legalization is acting as a lightening-rod for cannabis entrepreneurs from all over the world to plant their flag (if not their weed) in Toronto. Canada, with mature financial markets, has a first mover advantage and will clearly be the pioneers that will eventually start to export know-how to expertise to others parts of the world.
CSE trade was so strong in December, following the House of Commons approval of the Cannabis Act in November, that trade volumes exceeded those of the TSXV for several sessions, according to CSE Vice President Rob Cook. The tidal wave of money going into cannabis companies last year led to several companies exceeding C$100 million in market capitalization and more than C$1 billion raised on the CSE for the first time. And that was just the start of it.
Issuer financings surged to over C$1.4 billion in the first six months of 2018, driven by the cannabis industry. Trade volume surged 535% to C$10.1 billion, also exceeding last year’s total volume of C$7.8 billion. That’s no coincidence. Liquidity is a product of investor interest in the stocks that are traded on any given exchange, Cook said.
“There aren’t too many hockey sticks you’ll see that aren’t projections,” Cook said during InvestorIntel’s Buds, Batteries & Blockchain 2018 conference held in May. “This one is historical.”
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The number of companies listed on the CSE rose from less than 100 in 2007 to close 350 this year. In that same period, TSXV companies have dropped about 20% to the 2,000 mark, Cook said. Even though cannabis companies also trade on the TSXV, many are attracted to the CSE because it’s less expensive to list.
It’s not all about weed. Dozens of innovators in blockchain and cryptocurrency technology are flocking to the CSE. A record six companies in this segment have listed this year, including Global Blockchain Technologies Corp. (CSE: BLOC). The CSE has taken a proactive approach to growing concerns about the security of cryptocurrencies. The exchange is installing a blockchain to trade security token offerings (STOs) in an online marketplace. The intention is to offer real-time clearing and settlement, which would be a breakthrough of global significance.
Mining companies represent a third of the CSE listings, and are a growing segment as the industry recovers from a multi-year slump. New technology is again a common thread in this segment, as many companies are searching for new technology metals, especially the cobalt, lithium and nickel that will be used in electrical vehicle batteries.
For the CSE, there’s more to come, as there was a record number of listing applications in the first half of 2018. These were especially driven by bringing innovation to a fully legalized cannabis industry in Canada. And much of this thrust is coming from US entrepreneurs who are seeking to get involved in the legalized cannabis industry.
“We see international issuers becoming a greater presence on the exchange,” CEO Richard Carleton said in a July 24 statement. “This will benefit all of our issuers by drawing broader attention from overseas investors to opportunities presented by the many dynamic companies that call the CSE home.”
Matt Craze works with New York-based management consultancy 10EQS and is the founder of Spheric Research, a firm dedicated to global seafood industry research. Matt ... <Read more about Matt Craze>