2014 was a good year for the technology and innovation sectors in Ontario and across Canada. In fact, the sectors have mounted a comeback over the last five years and have shown impressive depth and dynamism. Over this period, several innovative companies have been founded, built and funded in Canada thanks to dedicated founders, pioneering ideas and seasoned mentors (like those in the MaRS network). Throughout these years, we have also seen a new wave of exciting startups being incubated and propelled forward across the country, from coast to coast.
While the Canadian innovation sector has come a long way in the last five years, many people forget (or don’t know) that Canada’s public equities markets have also evolved significantly during this time. In fact, initial public offering (IPO) and new listings activity for technology and innovation companies on Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) is stronger than it has been in years.
With this in mind, the team from MaRS asked me to put together my thoughts on the most common myths—or misunderstandings—about the public markets and the innovation sectors in Canada.
Listed below are the top five myths I see about our country’s leading public equities markets, TSX and TSXV, and the innovation sectors (comprised of the technology, clean technology and renewable energy and life sciences sectors) on the Exchanges.
Every sector and public company is subject to its own unique set of factors and conditions, but in 2014, there was a noteworthy increase in overall capital raising activity in Canada. In fact, $52.5 billion in equity capital was raised on TSX in 2014, an increase of 32% from 2013. On TSXV, our public venture marketplace, $5.2 billion in equity capital was raised, up 39% from 2013.
Actually, the Canadian equity market is one of the largest in the world and has an outsized impact for a country that is home to just over 35 million people. Since the start of 2012, more equity capital has been raised by companies listed on TSX and TSXV (combined) than by those listed on any of the major stock exchanges in London, Germany, Tokyo, Shanghai and Australia. Together, TSX and TSXV only trail the New York Stock Exchange, NASDAQ and the Hong Kong Stock Exchange over this period.
The Exchanges are very proud to be home to some of the world’s leading natural resource companies (TSX and TSXV lead all other global exchanges by the number of listed companies and equity capital raised in the mining and oil and gas sectors.) However, that said, mining and energy companies collectively represented just over 20% of the total market value of all of the companies listed on TSX and TSXV as of the end of 2014. In other words, a lot of other sectors matter, including the innovation sectors (more on this below).
In reality, the innovation sectors the fastest-growing sectors on TSX and TSXV for two years running. When looking at 2014 specifically, these sectors ranked No. 1 by the number of IPOs and new listings, either outpacing or matching other sectors, such as mining and oil and gas. The aggregate market value of TSX- and TSXV-listed companies in the innovation sectors has also increased by over 110% since the start of 2013—more than any other sector.
In 2014, 50 innovation companies went public on TSX and TSXV. This represents an IPO or new listing every seven business days, on average—again, that’s more than any other sector on the Exchanges. The companies that have gone public include businesses at all stages of development and from around the world. They also include businesses backed by some of the largest private equity and venture capital investors in North America.
The key takeaway from all of this is that the Canadian public equities markets have evolved significantly over the last few years, and this evolution has given innovation companies of all sizes new funding options. Investor appetite for good quality businesses has been strong recently, and large- and small-cap companies from Canada and around the world continue to look to TSX and TSXV to take their businesses or bright ideas to the next level.
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