The TSX Venture Exchange (TSX-V)
A Look at Canada's Small and Micro Cap Marketplace
If the Toronto Stock Exchange (TSE or TSX) is like Canada's version of the New York Stock Exchange, then the TSX Venture Exchange (TSX-V) is like the NASDAQ Small Cap or OTCBB exchanges.
The TSX Venture 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 (CDNX), but the TSX Group purchased the exchange and renamed it to incorporate its namesake.
The TSX Venture Exchange deserves a closer look if you are in the U.S. looking for a foreign exchange to invest in. The TSX has many companies involved in a number of industries, but the majority are in mining and energy.
Who Lists on the TSX Venture Exchange
There are over 1,600 companies listed on the TSX Venture Exchange with nearly 400 included in the S&P/TSX Venture Composite Index. Companies listed in the composite index are primarily mining (53%) and traditional energy (15%) companies, while the majority of them are located in British Columbia, Alberta, and Ontario where these industries have prominent operations.
Trading on the exchange amounted to 27.3 billion shares traded with a value of $8 billion Canadian in the first half of 2016. While new exchange listings have continued to drop since then, established companies were able to raise nearly CA$41.5 billion in capital, primarily through a combination of private placements and supplementary public offerings.
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:
- U.S. investors can purchase stocks traded on the TSX-V directly using brokerage accounts that support such foreign trades. Many online brokers in the U.S. support trading on the TSX and TSX-V without additional added expenses.
- Many TSX-V companies are dual-listed in the U.S. as American Depository Receipts (ADR), making it possible for U.S. investors to purchase them on U.S. exchanges. However, investors should be aware that these ADRs (a certificate from a bank for a share purchased on a foreign exchange) may be less liquid than their TSX-V counterparts.
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 (small market capitalization) companies in the United States, including a lower margin of safety than large-cap (large market capitalization) 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 the number of companies listed on the TSX Venture Exchange, investors have many options to choose from when selecting investments. 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 CA$5 million, closing share price of greater than CA$0.25, listing for more than one year, and a share price of at least CA$0.10 the year before.
Some of the most popular stocks on the TSX-V include:
- Storm Resources Ltd. (SRX)
- Gold Standard Ventures Corp. (GSV)
- Roxgold Inc. (ROG)
- Tidewater Midstream & Infrastructure (TWM)
- Gold Reserve Inc. (GRZ)
Some Final Thoughts
The Toronto Venture Exchange—or TSX-V—is Canada's version of the NASDAQ Small Cap Index of over-the-counter markets. International investors looking for riskier investments, particularly in the materials and energy sectors, may want to take a closer look at the exchange as a way to diversify their portfolios abroad.