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Canadian Securities Exchange on best run ever as issuers capitalize on strong market

The exchange's growth has been so extraordinary one wonders if anyone truly saw it coming
Canadian Securities Exchange on best run ever as issuers capitalize on strong market
CSE CEO Richard Carleton (far left) in Israel with Listings VP James Black (far right)

Observers might be surprised to learn that it has been four years since the Canadian Securities Exchange adopted its current brand, the name change undertaken because the organization felt it was ready to challenge for a greater share of the activity generated by Canada’s small-cap public companies.  One wonders how many of its executives realized what a turning point they were at in the exchange’s fortunes at the time.

The achievements in the intervening years have been truly outstanding: a 90% increase in listings, transaction volume up by over 2,000%, trading value up by over 3,000%, and similarly exponential growth in the amount of capital raised by CSE issuers.  To top it all off, the CSE Composite Index is sitting at an all-time high.

CSE Chief Executive Officer Richard Carleton is quick to give credit for the exchange’s growth to the broader financial community, of which the CSE and its team are but one member.

“The growth of the CSE over the last few years is a model of how the Canadian public equity markets can provide the capital entrepreneurs and innovative companies need to expand their business. Exempt market advisors and private investors have teamed with the Canadian broker-dealer community and public market investors to finance exceptional growth,” remarks Carleton.

“The CSE simply tries to provide the best listing environment possible from the standpoints of cost, compliance and a variety of ongoing support so that our issuers can deploy more resources to building their business.  Our goal is to facilitate the lowest cost of capital in the country for these types of companies.”

That ethos is reflected in simple listing policies catering to early-stage companies, a streamlined regulatory process, an affordable and fixed fee structure ($7,800 per year once listed), and an ongoing effort by staff to organize engaging events, publish rich content and reach out in any way they can to spread the word about the exchange’s issuers and their respective industry sectors.

And trust that the as-yet-unreformed lawyer Carleton is hard at work as the face of the exchange, but also in the background influencing regulations to ensure small-cap public companies are treated fairly.

“We refer to ourselves as the Exchange for Entrepreneurs, and that’s in part because most of our team are from entrepreneurial backgrounds,” says Carleton.  “If you’ve grown a business before, you understand how challenging it is and remember times when you wish something worked better or you had a certain type of support network to turn to.  Our senior team all know what it is like to build a business from scratch.  We are always mindful of that and do what we can to create that environment.”

Stocks in several industry sectors are firing on all cylinders right now, but none has been as important to the CSE’s success over the last couple of years as cannabis.  Visit the CSE’s homepage and on many days, most, if not all, of the five most heavily traded issues operate in the cannabis space.

“The first cannabis-related companies on the CSE focused on cultivation opportunities for the medical use market in Canada,” says Carleton.  “We then saw companies with business in the cannabis ‘ancillaries’ space (delivery systems, extraction technologies, etc.), and finally a group of companies dedicated to large-scale growing and retailing networks in the United States.

“More recently, some of the momentum seems to have swung back to the Canada-focused issuers, what with legalization in this country expected halfway through next year.  There are some smart people building these companies, and some smart investors backing them, and the dynamic remains fascinating to watch.”

Carleton explains that the CSE is also interested in the potential of blockchain technology and cryptocurrencies as an asset class, with a handful of issuers recently enjoying major success by focusing on the space.

The exchange is working to formulate its own approach to integrating blockchain into its business model.  “But we are not rushing to throw the word into a press release,” Carleton notes.  “There are some very real applications for blockchain technology that could change the way certain things are done in our business for the better, but we definitely want to have a sound strategy before pursuing them.”

With an eye to the future both near and long term, the CSE has been strengthening its domestic standing and working to establish a meaningful presence in markets outside Canada.

Now that all discount brokers in Canada facilitate trading access to the CSE for their clients, retail investing on the exchange has taken off, as can be seen in the trading volume and value growth.  And a growing comfort with the CSE at the institutional investor level is evident in large financings supporting some of the exchange’s best-performing stocks.

On the international front, Carleton, along with James Black, Vice President of Listings Development, spent a productive November week in Israel where “there are perfect alignments with our marketplace.”  Israel, Carleton adds, “has a vibrant start-up ecosystem much like Canada’s, but their public capital markets are reserved for larger companies.  We see a clear opportunity there, whereby the CSE can supplement the traditional venture capital path and provide the many advantages of a public listing for growing Israeli companies.”

Also important to the CSE’s positioning going forward will be its burgeoning strategic alliance with the OTC Markets Group in the United States.  The two markets frequently hold joint events introducing their advantages to potential issuers, and the response so far has been excellent.

“International companies can use us as a Canadian entry point to the US market and its large retail audience by seeking a secondary trading presence on the OTC markets, while Canada serves as the primary listing,” says Carleton.  “In that sense, the CSE is an exceptional gateway for companies looking to raise money and build shareholder interest in the US.”

One more measure of the exchange’s success comes in the form of a move by its largest shareholder, Urbana Corporation, which announced recently that it had purchased shares from other equity holders to increase its stake in the CSE to 49%.  Urbana, of course, is run by Thomas Caldwell, the Order of Canada holder who knows a thing or two about this type of business, his companies having been the second-largest shareholder of New York Stock Exchange seats before that bourse demutualized (his companies have held stakes in 37 exchanges around the world over the years).

Carleton speaks particularly proudly of the team inside the CSE, where marketing talent gels with compliance wonks and legal beagles work with technologists to create a well-oiled machine.

“It’s not easy,” Carleton laughs, “but it is fun, and I am proud to say that everyone is committed to what we are doing and enjoys working together to make a difference.  We really believe that by providing that path to efficient capital acquisition and corporate valuation, we are doing something that creates jobs, facilitates innovation, and benefits Canadians from coast to coast.”

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