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Verbatim: The CSE’s Mark Francis

Does Canada need another stock exchange?

Apr 2, 2014

by Max Fawcett

Mark Francis
Photgraph AJ Valadka

Who: Mark Francis
Age: 53
Lives: Calgary
Company: Canadian Securities Exchange
Discussing: Who the CSE is best suited for

This past January, the Canadian Securities Exchange (formerly the CNSX) announced a rebranding as part of an effort to attract more visibility – and more listings. With just over 200 listed companies, it has a ways to go before it can go toe-to-toe with the TSX Venture, which has more than 2,000. But its proponents insist that it’s not just another exchange – it’s a different one, and maybe even fundamentally better. Mark Francis explains why:

“We have a better listing model for entrepreneurial companies. It’s streamlined regulation – the policies are 60 pages long, approximately, instead of the 800-odd pages [that companies have to fulfill to get listed on the Venture exchange]. We give entrepreneurs the ability to execute quickly, which is particularly important for technology companies. For that reason, we’ve been punching above our weight in the IT space.”

“Although we’re told the average legal bill for regulatory costs is 40 to 60 per cent of what it would be on a competing exchange, the lawyers actually like it better. If it’s a dynamic company, they get to do more of the interesting legal work, which might be acquisitions of another technology, and it’s not held up by a business case merit review at the exchange level. And technology companies frequently pivot three or four times before they have their success, and don’t look anything like they looked at the beginning. So the lawyers tell us they far prefer it.”

“It’s very well suited to mining juniors. For oil and gas companies, the regulatory and legal expense is a little less critical. There are situations on a case-by-case basis where companies are happier on the CSE, but because the minimum threshold of an oil and gas junior has risen so dramatically – ARC [Financial]’s information is that it’s around $150 million in equity for a startup – suddenly regulatory cost threshold is not a critical issue.”

“A monopoly is never good. The Venture has done an excellent job of creating respectability internationally for larger resource companies. If a company is raising $100 million for an oil and gas venture, at this point in time they belong on the Venture or on the big board. But you can’t have one design to fit all suits, and we believe we provide an excellent competitive alternative – and a necessary one.”

“I think the attraction is that our companies have a lower regulatory cash burn – a lower survival cash burn. That’s particularly critical in the bear market phases. We have not yet done a comprehensive, independent review, but we have anecdotal evidence that our companies performed better than the Venture listings in the bear market, when you compare apples to apples. We also believe our listings have had more potential for upside because when a smart entrepreneur has it right, they’re able to execute very rapidly. The ability for management to execute and have a lower administrative cash burn increases their chance of a win, and increases those wins when they have them.”


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