1. Money

What is the TSX Venture Exchange (TSX-V)?

A Look at Canada's Small and Micro Cap Marketplace

By

If the Toronto Stock Exchange (abbreviated TSE or TSX) is like Canada's version of the New York Stock Exchange, then the TSX Venture Exchange (abbreviated TSX-V) is like the NASDAQ Small Cap or OTCBB exchanges. The exchange serves as a public venture capital marketplace for emerging companies, particularly in Canada's rich natural resource sectors.

Prior to 2001, the exchange was known as the Canadian Venture Exchange (abbreviated CDNX), but the TSX Group purchased and incorporated the TSX's name.

Who Lists on the TSX Venture Exchange

There are some 2,258 companies listed on the TSX Venture Exchange, as of December 31, 2012, with a combined market capitalization of more than C$40 billion. Companies listed on the exchange are primarily mining (48%) and traditional energy (29%) companies, while the majority of them are located in British Columbia (42%), Alberta (24%) and Ontario (17%).

Trading on the exchange amounted to 43.2 billion shares traded with a value of C$23.6 billion in 2012. While new listings were down 28% in 2012 compared to 2011 with just 240 new companies, established companies were able to raise nearly C$6 billion in capital, primarily through private placements (~C$4 billion) and supplementary public offerings (~C$1.8 billion).

Updated monthly and yearly statistics regarding TSX-V exchange listings can be found on the Market Intelligence Group's section of the TMX website.

How to Invest in TSX Venture Exchange Stocks

Canada's stock markets are relatively easy to access for U.S. investors given the countries' close ties with each other. Moreover, Canada and the U.S. have tax treaties that avoid problems commonly associated with international investing, such as double-taxation. Investors simply must apply for the foreign tax credit or deduction on Form 1040 or 1116 with the IRS.

There are two primary ways to invest in TSX Venture Exchange listed companies:

  1. U.S. investors can purchase stocks traded on the TSX-V directly using brokerage accounts that support such foreign trades. These days, many online brokers in the U.S. support trading on the TSX and TSX-V without much added expense.
  2. Many TSX-V companies are dual-listed in the U.S. as American Depository Receipts, making it possible for U.S. investors to purchase them on U.S. exchanges. But, investors should be aware that these ADRs may be less liquid than their TSX-V counterparts.

Of course, investors should also be aware of the risks associated with investing in TSX-V exchange listed companies. These risks are the same as those associated with small cap companies in the United States, including a lower margin of safety than large cap companies and less liquidity that can make it more difficult to quickly buy or sell the stock.

Popular Stocks on the TSX Venture Exchange

With more than 2,500 companies listed on the TSX Venture Exchange, investors have many options to choose from when selecting investments. But, the most popular stocks on the exchange are grouped into an index known as the TSX Venture 50 - a group of strong performers from clean energy, diversified industries, mining, oil/gas, and life science sectors.

The components of this index are selected based on several criteria, including a market capitalization of greater than C$5 million, closing share price of greater than C$0.25, listing for more than one year, and a share price of at least C$0.10 the year before.

Five of the top performing companies for each sector on 2013's list includes:

  • OPEL Technologies Inc. (OPL)
  • Loyalist Group Limited (LOY)
  • Zenyatta Ventures Ltd. (ZEN)
  • Africa Oil Corp. (AOI)
  • iCo Therapeutics Inc. (ICO)

The full 2013 TSX Venture 50 list can be found in the TMX Group's press release.

Additional Information on the TSX Venture Exchange

©2014 About.com. All rights reserved.