TSX Venture Investing

The TSX Venture Could Stabilize in 2020

vancouver skyline

Despite the fact that it appears to be losing momentum after December’s rally, the TSX Venture is off to a strong start so far in 2020.

According to data from the TMX Group, total financings raised on the TSX Venture in January 2020 rose 24% in comparison to December 2019 – an increase of 59% from January 2019. Furthermore, although the number of financings fell to 140 in January 2020 from 146 in December 2019, they’re still up from 126 in January 2019.

January 2020 wasn’t all positive news for the TSX Venture, however. The junior exchange only welcomed one new issuer last month – a capital pool company. Still, investors shouldn’t find this figure too off-putting; the new issuer metric is becoming increasingly irrelevant given the prominence of RTOs on the junior exchange. Instead, investors should keep a close eye on total financings raised and number of financings.

In total, companies raised approximately $486 million on the TSX Venture in January 2020. While it may not be the explosive growth that investors witnessed between January 2016 and January 2018 (total financings raised on the TSX Venture skyrocketed 874.41% from approximately $87 million in January 2016 to roughly $874 million in January 2018), January 2020’s figures are nothing to balk at.

Chart of TSX Venture equity financing statistics for January 2020
Throughout the past five years, volatility on the TSX Venture has typically culminated in January (it was in January 2016 that the TSX Venture hit an all-time low of 483.67 in January 2016 and a 5-year high of 895.71 in January 2018).

Combine last month’s strong financing statistics with the fact that gold touched a new 7-year high of US$1,626.50 on the COMEX market today, and it becomes clear that the TSX Venture could be positioned for stability in 2020. The price of gold is an intrinsic part of the junior exchange’s value, and thus a key determinant of its volatility.

According to PricewaterhouseCoopers,

“The precious metal [gold] remains the most important commodity on the TSX-V, with 56% of the exchange’s valuation [in 2018] coming from mining companies with exposure to it.” 

Stability for the TSX Venture is in Sight

The fact that TSX Venture listed companies raised almost half a billion dollars in the first month of 2020 is extremely positive news for the exchange, given that it took TSXV companies all of Q2 2019 to raise a similar amount. While recovery for the TSX Venture in 2020 may be a long shot, stability looks likely – so long as financing activity and momentum for the price of gold doesn’t die down.


Pinnacle Digest

Recent Articles