TSX Venture Financings Continue to Collapse – Falling Below $500

The TSX Venture opened for trading above 1,000 for the first time since February this morning. The TSX was strong also as the TSX Cannabis Index rebounded. Back in January and February, weed stocks were white-hot. Today, oil, lithium, and even precious metals are driving the rebound. But, despite the rally in October and now November, something is amiss.

Financings Continue to Collapse on TSX Venture

Early last month, I wrote that,

“After averaging more than $1 billion per month in total financings raised for all of 2021, financing activity on the TSX Venture finally collapsed. September 2021 saw total financings decline from just over $1 billion in August to $699 million – the lowest in 2021 thus far.”

The decline to $699 million was just a preview. Total financings fell off yet another cliff, dropping to just $439 million in October, according to the TMX Group. For an exchange worth over $100 billion, this is a small number. Consider this: even in October 2020, a far weaker year for the TSX Venture than 2021 (when all issuers on the exchange were worth only $60 billion), total financings totaled $634 million on the exchange.

Investors are foregoing speculation via private placements and opting to participate in the open market. While a more liquid and flexible option, they are withholding the elusive warrants attached to many financings that can turn big paydays into huge ones.

One key point is that the value of all market cap listed issuers year-to-date is a whopping $109 billion, compared with just $60 billion at this point in 2020 – an 81.3% increase.

As the value of Venture deals and the overall exchange continue to increase, so should financings as the year continues.

Looking Ahead, Reasons to Be Optimistic Persist

The TSX Venture is still up a massive 35% this year. Despite the exchange trading largely down or sideways since February, there is hope for a Christmas rally. With inflation taking over, Canada’s equities find themselves in an enviable position. Plus, cannabis stocks may be coming back to life.

The TSX Cannabis Index closed at 138.46 Tuesday, just off its intraday high. After touching a year low of 118 on November 5th, the index is up 20 points in the last few days. Canopy Growth is leading the charge, up 17% in two days. The TSX Cannabis Index hit a year high of 417 on February 10th of this year. If weed stocks continue to run, with oil and the precious metals firming up, November could see financing activity bounce back in a big way.