Canada and Mexico

Northern allure: Why LatAm companies are looking to Canada to raise capital

Bnamericas Published: Thursday, April 15, 2021
Northern allure: Why LatAm companies are looking to Canada to raise capital

Guillaume Légaré, the South America head of the Toronto Stock Exchange and the TSX Venture Exchange (TMX Group), speaks to BNamericas about why Latin American companies are seeking to tap Canada's leading equity markets for their capital growth needs. Légaré will be a speaker at the 2nd South America Energy Series virtual summit, to be held from April 28 to 30. Click here for more information. 

BNamericas: What is the difference between the Toronto Stock Exchange and the TSX Venture Exchange and what are their benefits for companies?

Légaré: TSX and TSXV provide a meaningful platform to supply growth capital for LatAm companies, in strategic sectors like mining, energy and renewable energy, and innovation. There is a full spectrum of benefits offered by our unique, two-tiered market ecosystem, and Canada’s equity markets represent an ideal growth platform for LatAm businesses, providing global leadership and world class access to capital and liquidity. Today, there are 3,289 issuers on our markets – 1,649 on TSXV and 1,640 on TSX – with a total market capitalization of CAD$3.5tn (US$2.8tn).

BNamericas: What are the benefits of listing on the TSX?

Légaré: It provides a market for established businesses and management teams with experience in public markets; it offers access to international institutional investors; it has globally visible indices utilized by investors; it has corporate governance appropriate for established issuers; it has a 160-plus year history and is a respected, leading global exchange.

BNamericas: What are the benefits of listing on the TSXV?

Légaré: It provides access to capital for early-stage companies and smaller financings, typically with a financing range of CAD$2-20mn; it has an extensive mentorship program for newly public companies; it has a streamlined graduation to TSX; it offers tailored listing and corporate governance requirements for small-cap companies; it provides access to investment banking support for financing and acquisitions as well as research to support the company’s investor base.

BNamericas: Which of the two exchanges is best suited for energy companies seeking capital for their Latin American businesses? Or perhaps you could tell us which types of companies might choose one over the other?

Légaré: The TSX and TSXV have a global strength for funding the mining sector. This is built around a strong regulatory system for the mining sector and the largest global investor base for funding the mining sector. We are the leading mining exchange: TSX and TSXV are home to more mining companies than any other market in the world, and have a diversified roster of public mining companies by commodity and stage of development.

LatAm is the most important mining market for TSX and TSXV: There are currently 410 TSX and TSXV issuers with mining properties in Latin America. In total this accounts for 1,061 mining properties.

The TSX and TSXV are playing an active role in helping to develop Latin America’s mineral wealth. Toronto’s ecosystem understands and supports mining, risks and opportunities. It is important to reiterate our unique two-tiered ecosystem, where a company can list on our junior market TSXV and then graduate to the main board TSX when the timing is right to meet growing capital needs. 

In addition to this, TSX has an emerging strength in the renewable energy sector and we believe that certain LatAm companies will utilize the Canadian markets as part of their growth strategy as industry and governments pursue things like vehicle electrification and lower carbon strategies.  

TSX is home to one of the most impressive stock lists for pure-play renewable energy companies, and utilities. These companies like Boralex, Innergex or Brookfield Renewable Energy have renewable energy assets in Canada and around the world. Canada has strong infrastructure to support the growth of renewable energy companies and we hope to see more LatAm companies in the renewable energy space using TSX as a growth platform.

BNamericas: There are many TSX-listed oil and gas and mining companies in Latin America. Why is this the case? Do you have a figure on how many Latin America-focused companies are Toronto-listed? 

Légaré: Canada has a unique regulatory environment that supports the mining and oil and gas sectors globally and an investor base with a deep level of expertise for investing in commodities and renewable energy.

TSX and TSXV are global leaders in the energy sector, comprised of oil & gas, energy services, utilities and pipelines, and renewable energy companies. In terms of the capital flowing to TSX-listed renewable energy companies, the S&P TSX Renewable Energy and Clean Technology index is up 128% since 2016.

BNamericas: Can companies headquartered outside of Canada be listed on the TSX or TSXV? And how can a company go about being listed on one of these exchanges?

Légaré: Yes. Our main objectives are to bring more international listings to our markets, better promote our junior exchange TSXV to LatAm management teams, maintain our dominant position in the mining sector and be more active in strategic sectors like renewable energy and innovation.

Markets are increasingly competing for capital and investors are looking at opportunities in Latin America and the investment conditions, political stability and pro-business environment. There are unique growth opportunities in sectors that are strategic to our TSXV and TSX markets and we believe we have an important role to play to allow LatAm companies to access growth capital in a timely fashion.

As an example, we are planning our 2nd TSX Latam Energy Virtual Investor Day this summer, to introduce LatAm energy and renewable energy companies to strategic investors and stakeholders. 

BNamericas: What are some of the advantages that the TSX and TSXV have for Latin America-focused companies compared to other stock exchanges?

Légaré: A listing on TSX or TSXV gives LatAm companies access to Canadian retail institutional investors. Canada has a globally recognized set of pension funds and institutional investors managing over CAD$5tn in assets. TSX and TSXV also have a strong retail investor base. In addition to this, over 40% of all daily trading on TSX comes from outside of Canada.

LatAm companies benefit from getting access to the Canadian investor base. In general, the types of LatAm companies that will most benefit from accessing the Canadian market are in the mining and energy sectors.

There are opportunities for companies at every stage of growth and our equities markets finance companies across their lifecycle. Some 31% of all current TSX companies are TSXV graduates showing that the TSXV successfully incubates early-stage companies. We have found that 39% of TSX innovation companies graduated from TSXV while 52% of TSX mining companies graduated from TSXV. Meanwhile, 18% of S&P/TSX composite index constituents are graduates of TSXV. It's a stepping stone to the US market. Eligible companies listed on TSX and TSXV can add a listing on NYSE or Nasdaq relatively easily via the MJDS system [Multijurisdictional Disclosure System].

BNamericas: How has the pandemic affected activity on the TSX and TSXV? Have the number of listings increased or decreased? And how has stock trading activity been impacted? 

Légaré: Overall, 2020 was an exceptional year for TSXV and TSX. There was a record number of IPOs and amount of IPO capital raised on TSX in the last 10 years. There were 300 new listings, 171 on TSX and 129 on TSXV. Meanwhile, CAD$42.8bn in equity capital was raised: CAD$36.2bn on TSX and CAD$6.6bn on TSXV.

Mining and renewable energy have both benefited from cyclical market trends over the last year. Commodities have had heightened interest over the past year, led by metals like gold that investors look to for stability and metals like lithium and other battery metals that are viewed as critical to emerging trends like vehicle electrification.

In 2020, the inability to travel has challenged international financing and M&A. There is no doubt that the pandemic has affected the ability of companies and investment bankers to travel across borders to perform due diligence and raise capital. Both banks and companies are adapting to the situation and using virtual technology for meetings and due diligence but there is no doubt that it has created a challenging environment for cross-border deals.

BNamericas: What is the outlook for the TSX and TSXV for the rest of 2021, both from a perspective of the number of listings and also in relation to trading volumes?

Légaré: We are determined to develop our LatAm regional presence. In 2019, TSX and TSXV became the first international exchange group to make a strategic decision to establish a full-time presence in South America. Through our regional presence, we are looking beyond the COVID-19 crisis and we remain committed to maintaining and strengthening our relationships with our existing clients, potential new issuers, and the professional advisors that service the Canadian capital markets ecosystem.

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