Feds fumble finance facts

There was an odd number and an associated claim in the federal government’s budget package last night, and it was repeated without question by the dead tree media, among others. Here is the excerpt from the “Creating a Canadian Advantage” section:

“Canada has almost 3,800 publicly-listed companies, far more per capita than many other developed countries. For example, the U.S., with a population nine times that of Canada, has 5,100 listed companies.”

Odd, I thought. I recall a study a few years ago by a local i-bank (I worked there at the time) that identified ~11,318 listed companies in the United States. Could it be that someone at 110 O’Connor Street just looked at the NYSE and the NASDAQ web sites, added them together, and voila! A stat for the budget speech. Not possible, you say? Let’s review:

NYSE has 2,764 “issuers”, of which 480 are closed-end funds and 600 are structured products. So that leaves the Big Board with about 1,700 listed companies (of which 451 were foreign-based, but the TSX is also home to dozens of foreign firms).

NASDAQ boasts that it trades 3,200 companies, but they’d also say that about 15% of their daily volume is from NYSE-listed firms. In February 2007, for example, 297 NYSE-listed firms traded over 30% of their volume on the NASDAQ. The message is that there is some overlap for sure.

AMEX has 840 listings, but that includes warrants, closed-end funds, etc. 69 new companies listed on the AMEX in 2006, alone. 95 in 2005.

Philadelphia Stock Exchange now is largely an options market

OTCBB provides access to 3,300 “securities”, most of which are companies, almost equalling the TSX and TSXV itself.

Then there’s the Pink Sheets, which is privately owned, and another outlet to thousands more.

All in, you can easily track twice as many publicly-traded companies on U.S. exchanges as our Finance Department could find.

TSX has what they call about 1,500 “senior issuers” and 2,200 “junior issuers” according to their last annual report. Now, the TSXV’s average market cap at that time was just over $15 million, and several hundred have a market cap well below $2 million (yet the TSX keeps them around anyway – good fees) but a listed company counts when the the Federal government is trying to make a point. Another way to look at the stats is that the 300th largest company on the TSX by market cap often has a market cap below $250 million. Which means about 3,400 (92%) of the TSX and TSXV’s listings have market caps that are below the entry point into small cap land: being around $250 million in the eyes of most Canadian institutional investors.

Whether or not the 3,800 “listed public companies” figure is precise or not, what is clear is that while the TSX / TSXV combined may have an average market cap of $488 million or so, the vast majority of those companies have a market cap of far less than $50 million. (With an average market cap. of just $15 million on the TSXV, according to their last annual report, and the TSXV accounts for 60% of the combined listings.)

This budget paper has many worthy ideas (pushing a national securities regulator, consoldating the debt issuances by the Crown Corps. and strengthening the IMET, for example), but the stock market piece is worthy of some fine-tuning to say the least.

Canadians definitely do not have a higher per capita number of actual liquid, viable, publicly-listed companies, unless you include the ones with a market cap. of $2 million, and ignore the thousands of American firms that trade on the Amex and OTCBB. Minister Jim Flaherty was not well-served by staff on this one.

Otherwise, the budget was a fine performance and will serve our Country well!

MRM