The TSX Venture Exchange has real problems. Liquidity is drying up. Listings are declining. Hundreds of listed companies have almost no money and no apparent way to create shareholder value. Competition from both new and established rivals is growing.
And the S&P/TSX Venture Composite Index is hitting humiliating new lows on a regular basis. It fell below 500 points for the first time on Dec. 14, down a mind-boggling 85 per cent from its record high in 2007.
None of these facts will come as a shock to investors who, for the most part, are avoiding this exchange like the plague. But the meltdown has finally reached a stage where TMX Group Inc. acknowledges that it is time to take action.
Until recently, the Toronto-based company argued that the Venture’s woes are a function of market conditions. After all, hardly anyone wants to finance junior mining and energy plays during a steep commodity downturn, and they make up more than 70 per cent of stocks on the exchange.
But earlier this month, the company released a whitepaper with a detailed plan to “revitalize” the Venture. It was a tacit admission that the exchange’s current model needs to evolve.
“The first thing to acknowledge is that it really is broken,” said Rick Rule, chief executive of Sprott US Holdings Inc. and a major financier of junior resource plays. “There are still a lot of participants who don’t think it’s broken.”
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