The Canadian Securities Exchange reported that it has received final approval from the Ontario Securities Commission and British Columbia Securities Commission to launch a senior tier for its larger and later-stage issuers.
Approximately 100 companies will move to the new senior tier starting in May. According to the Globe and Mail, the senior tier will be “very heavily dominated” by cannabis companies with operations in the United States.
These cannabis companies are unable to list their shares on the Toronto Stock Exchange due to exposure in the U.S. where cannabis remains federally illegal. Many of the companies turned to the CSE as the New York Stock Exchange and the Nasdaq also deny listings to plant-touching cannabis companies. Only the Over-The-Counter Marketplace allows U.S. cannabis stocks to trade in the U.S.
The Globe noted that of the 108 companies set to join the senior tier, 39 are in the cannabis industry.
The CSE said that with these changes, “the securities of CSE Senior Tier issuers may be accessible to a broader range of institutional investors that could not previously trade CSE ‘Venture’ securities, and may meet criteria to be included in certain stock indices from which ‘Venture’ securities are currently excluded.”
The CSE said it will also be able to list exchange-traded funds (ETFs) on the senior tier.
In addition, the CSE has asked the New Self-Regulatory Organization of Canada to grant margin eligibility to securities listed on the CSE. If granted, margin eligibility will reduce the cost of capital for eligible CSE-listed issuers and improve trading liquidity in their securities.
“The ultimate object of the exercise here is to ensure that senior companies receive a lower cost of capital,” CSE chief executive Richard Carleton told The Globe and Mail. “Just as it is a lower cost of capital for companies listed on the Toronto Stock Exchange than it is for companies listed on the TSX Venture, we will be tracking very carefully whether companies on our senior tier are in fact rewarded with a lower cost of capital versus companies that are on the regular CSE market.”
“When the Canadian Securities Exchange opened its doors in 2004, we had a specific mandate to serve early-stage companies – primarily in the resource sector – and our listing policies reflected the needs of these smaller issuers. Today, nearly two decades later, we have grown from our start-up roots, having attracted large and diverse listings from Canada and around the world,” said Carleton in a statement. “These Amendments create a level playing field with other exchanges, enabling us to meet the current needs and expectations of our issuers and investors.”
Carleton also told The Globe that “he’s less motivated by the ability to poach listings from competitors than a desire to keep CSE-listed companies from leaving.”
The CSE is also launching new branding in conjunction with the change.
“While the CSE will always be the Exchange for Entrepreneurs, our new positioning statement Always Invested points to our unwavering commitment to provide value and exceptional service to all facets of the capital markets community that we serve,” Carleton added.