2023, particularly in relation to the TSX Venture, is reminiscent of 2015 — a year which saw investment on the exchange dwindle along with sentiment.
Much like this year, in 2015, the TSX Venture Composite went from roughly 690 to start down to around 525 to finish…
A Cleanse
I remember those days well. Weak management teams with poor execution and shareholder communication paid dearly. 2015 was the capitulation of what I called the junior miner clean out… nothing exciting was happening, and it was a nasty time for entrepreneurs, brokers, speculators and promoters, with many getting wiped out financially (no different than 2023).
After years of hanging on from the previous commodity bull, which ended in 2012, many juniors threw in the towel in 2015 (because their projects were essentially uninvestable). They underwent a change of business and restructuring dance.
We are seeing similar activity today with juniors who targeted out-of-trend commodities or had cannabis-related business models… they’re delisting or looking to an RTO.
Pundits were calling for the end of the Venture in 2015, highlighting the hundreds of ‘zombie companies’ on the exchange. The reality turned out a lot different, though. In the years following, the Venture had some of its best on record from a financing, index appreciation, and diversification perspective.
Reasons to be Bullish
Like 2015, 2023 was also a year before the U.S. election… markets typically do well in an election year. The TSX Venture Composite gained roughly 45% in 2016.
While history doesn’t repeat, it often rhymes. Our latest podcast discusses what went down in 2023 in Canada’s venture capital world, what to look for in startups these days, and which sectors Alex and I like heading into 2024. If my thesis is correct, much like in 2016, we could see several industries provide a lift for startup and venture investing in Canada…
The more sector representation on the TSX Venture, the merrier. Optionality in the VC world is critical to avoiding capital concentration in one or two industries, a long-time TSXV Achilles' heel that has led to swift booms and busts.
I hope you enjoy the pod!
Disclaimer: This article and the included podcast must not be construed as tax, legal, insurance, financial advice, or other & may be outdated or inaccurate. This article does not provide a complete overview of the subject matter discussed. Aaron Hoddinott is not a registered broker-dealer or financial advisor. Before investing in anything, consult your financial advisor, tax advisor, and other relevant industry professionals.
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