Pipeline Panic Spurs TSX Venture Weakness


TSX Venture weakness abounded towards the end of April, falling to 785 on the last day of April. Despite trade tensions between the US and China beginning to subside, uncertainty in the Venture prevails. Perhaps the focal point of tension is Canada’s energy sector and the future of Kinder Morgan’s Trans Mountain pipeline. Regional disagreements are nothing new to Canada. Look no further than the birth of the ‘Western Alienation’ sentiment, which enveloped Canada as early as 1979. It was this year Pierre Trudeau introduced the “National Energy Program” (NEP). Academics suggest that the NEP, while a political disaster, has also cost Alberta in the range of $50 to $100 billion.

Canada’s Energy Sector | A Story of Failed Potential

Decades later, the future of Canada’s energy sector is on the line again. However, this time is different—the hotly contested Kinder Morgan pipeline marks one of the first times that Western provinces have gone head to head—so much so that the very fabric of our country’s confederation is being challenged. Can one province contravene federal jurisdiction, especially when it comes to matters of national interest? In an attempt to coerce the B.C. government into submission, Alberta has gone so far as to enact legislation that limits the export of oil to British Columbia. These days are a far cry from the New West Partnership Trade Agreement of 2006, that practically brought the Western provinces (British Columbia, Alberta, and Saskatchewan) into economic union.

Much is on the table. After all, our economy, and thus the performance of the TSX & TSXV, stands to gain or lose depending on the Kinder Morgan pipeline outcome. Despite Kinder Morgan announcing the suspension of all non-essential spending on the pipeline project, the TSXV Energy sector continues to climb, with the pipeline project backed by strong support from not only the federal government, but the Albertan and Saskatchewan governments as well.

While only time will tell what happens to the Kinder Morgan pipeline project, one thing is for sure: historically speaking, Canada benefits when provinces set their biases aside in the interest of national growth.

TSX Venture’s Worst Performing Stocks of Late

  1. Patriot One Technologies (PAT) has declined from a recent level of $1.70 to $1.56. On April 25, 2018, Patriot One’s Jeanault Lasnier was invited and joined the board of the Canadian Electronics & Communications Associate (CECA).
  2. 01 Communique Laboratory (ONE) collapsed from $0.06 to $0.02 (-66.67%) in late April. On April 26, 2018 an IIROC Trading Halt was enacted “at the request of company pending news”. Coinciding with the harsh 66% drop, 01 Communique Laboratory announced that their ongoing patent lawsuit against Citrix Systems Inc. had come to an end—with the courts finding that Citrix did not infringe upon the Company’s patent.
  3. Millennial Esports (GAME) dropped from $0.54 to $0.36 (-33.33%) before jumping 5% on Monday. On April 23, 2018 the company announced a US$10 million in financing from a revolving credit facility, in which an annual interest rate of 10% is applied to the principal amounts drawn. The Company had an initial drawdown of US$1,100,000.
  4. ARHT Media (ART) has declined from a recent high above $1.40 to $1.07 today.
  5. VersaPay Corporation (VPY) was off about 10% from $2.20 to $2.10.
  6. Cortex Business Solutions (CBX) was down from near $4 to $3.70.
  7. Reliq Health Technologies (RHT) was off more than 10% from $2.08 to $1.86 per share.
  8. Prodigy Ventures (PGV) fell more than 13% from $0.195 to $0.165.
  9. OneSoft Solutions (OSS) dropped more than 7% from $0.49 to $0.455, before rebounding Monday.
  10. Shoal Games Ltd. (SGW) fell from $0.65 to 0.60.

TSX Venture’s Best Performing Stocks of Late

  1. Resaas Services Inc. (RSS) had a major move last week, rising from $0.55 to a high of $0.65 today.
  2. Katipult Technology Corp. (FUND) was up more than 14% from $0.57 to $0.65. The upwards trajectory was likely spurred by an April 16, 2018 press release, in which Katipult announced that they had “started coverage of the United Arab Emirates (UAE) after adding two leading investment firms in the country as clients”.
  3. Venzee Technologies (VENZ) jumped 22% from $0.385 to $0.47. The upward trend began just one day after the company introduced a new enterprise pricing strategy, in addition to entering “advanced” discussions with over 20 potential enterprise channel partners.
  4. Powerband Solutions Inc. (PBX) moved 12.5% higher from $0.20 to $0.225.
  5. Intouch Insight Ltd. (INX) rallied over 8% from $0.435 to $0.47.
  6. Symbility Solutions Inc. (SY) moved 4% higher from $0.40 to $0.44 per share. The uptick began on April 12, 2018, with the announcement they were collaborating with HOVER to “adjust costs and decrease cycle times”.
  7. RewardStream Solutions (REW) gapped up over 7% from $0.325 to $0.35 per share in recent days.
  8. Universal mCloud (MCLD) jumped 11% from $0.36 to $0.40. The share value increase began a day after announcing a signed agreement with Cypress Envirosystems to “target large institutional buildings”.
  9. Fintech Select Ltd. (FTEC) jumped 6% from $0.165 to $0.175.
  10. Urbanimmersive Inc. (UI) climbed a penny and a half from $0.09 to $0.105.

 

Canada’s Energy Sector to Determine Sentiment in Months Ahead

As the global markets enjoy a slight reprieve from the onslaught of regulatory themed Trump tweets, investor confidence in Canada’s energy sector hangs in the balance over the fate of a C$7.4 billion pipeline project. The Kinder Morgan pipeline is an excellent example of how differing opinions on provincial and federal powers (in addition to differing regional identities) can create volatility in the marketplace. However, just as volatility in one sector can trickle into another, the same can be said for growth. A striking comparison might be in the potential economic benefits of the Kinder Morgan pipeline project. Is it not true that all provinces could share in the economic growth afforded by improved resource exporting capabilities? Whichever the outcome, Canadians—and our economy—are stronger united.