Globe & Mail: access to capital will get worse if no merger

TSX / LSE Merger Part 13

News report by Tim Kiladze: TMX addressed some of Prentice’s concerns

Dear Tim,

We’ve not had the chance to meet for real, but seeing your photo in the newspaper, and the regularity of your helpful Twitterfeed, gives me a false sense of familiarity. I’m sure its mutual, and hopefully not solely because of last year’s hunger strike (see prior post “Hunger Strike – Day One” June 16-10). It might have been before your time, but your readers twice voted our spot to be in the Top 10 of the Finance and Markets blogosphere. So, yes, “we” have some history. And it’s almost all very positive.

Let’s get right to the point. I read your news/opinion combo piece on Jim Prentice’s TSX/LSE speech yesterday, and I’m certain the folks at Navigator were delighted. They are finally getting their client’s message out via credible avenues, which has been an acknowledged challenge for the TMX Group to date.

I’m all for pointing out the very issues you raised; you said, in essence, that former Industry Minister Prentice was calling for assurances that had already been promised. Fair game, and you could have been less polite about it. The fact that you didn’t stick the knife in bodes well.

There’s just one issue that we need to discuss. It’s this whole access to capital notion, as reported in your online post:

However, Mr. Prentice’s other request, continued access to domestic and global capital, can be hard to assure because the markets are so volatile. But it’s likely that TMX would argue access to capital will only get worse if the merger doesn’t go through and TMX becomes an even smaller player on the global stage.

For fear that you’ve not heard this already, no evidence has been presented that the TSX/LSE merger would improve the “Access to Capital” for the 4,200 listed securities on the TSX & TSXV. My presentation to the Ontario Select Committee, which was reported on in your paper, provided legislators with a half a dozen specific examples of how Canadian firms have found this argument to be Fool’s Gold (see prior posts “TSX/LSE merger sheer madness for small caps” Feb 11-11 and “Turning the clock back to 2006 on LSE hype” Feb 13-11).

U of T academic Jon Aikman has echoed my observation that there are potentially more relevant markets to Canadian entrepreneurs than England (see prior post “Is the LSE the only game in town? Feb 16-11). The important thing to remember is this. No academic evidence or credible industry reports have been tabled to support the contention that “access to capital will only get worse if the merger doesn’t go through and TMX becomes an even smaller player on the global stage”. You’re just promoting the “Bogey Man” argument with that angle (see prior post “TSX’s PR recovery underway” Feb 22-11).

According to the industry folks I’ve spoken to, the ones who actually have to raise the capital for entrepreneurs, there is nothing about this merger that will improve the access to capital for most Canadian firms (see prior post “YM Bioscience another case of TSX/LSE false hope March 4-11). You should call them up yourself. Indeed, one mining banker said that London’s current junior mining world “is more seedy than Vancouver ever was 20 years ago”. Doesn’t sound like a great environment to be “accessing”, now does it?

As CI Financial Executive Chairman Bill Holland told your colleagues a couple of weeks ago, an “exchange is just a bunch of computers.” Merging two exchange holding companies might give you more efficient computers, but it in no way can ease a small cap company’s ability to access capital in Knightsbridge or Frankfurt.

After almost four weeks of constant media coverage, no one has provided a credible case to the contrary. The fact that you have only the TSX to quote on that point is proof positive.

MRM