The Investment Industry Association of Canada has published a paper examining the decline in Canada’s equity markets.
The study revealed that the number of companies listed on the Toronto Stock Exchange nosedived from 1,486 in 2008 to just 747 in 2023, representing a 50 percent decline in 15 years. Moreover, the TSX recently experienced an 18-month drought in initial public offerings.
Rather than going public, Canadian companies also decided to divest their businesses to foreign buyers instead.
“The public equity markets are a reflection of our private sector vibrancy (or lack of). Conversely, the challenges public markets face in breathing the lifeblood of risk capital have long-term consequences for the health of the private sector, including entrepreneurship, technological advancement, ability to scale and adapt to market changes, job creation, productivity and competitiveness, and regional economic balance,” paper author and IIAC advisor Thomas Kalafatis said.
He proposed limiting the burden of fixed costs on issuers and intermediaries. He also proposed increasing participation in private placements of 'non-brokered' (non-underwritten) deals and their securities and secondary trading via transparent rules-based platforms.
Kalafatis suggested reducing the crowding out of private sector investment due to government spending and borrowing and developing a policy environment that supports financial institution groups in seeking growth and global expansion.
“The hollowing out of Canadian equity capital markets has the consequent result of harming the economic position of issuers, employers/employees, investors and intermediaries,” he warned.
In addition to his role with the IIAC, Kalafatis is the managing partner of Hullwright Advisors.
The IIAC is a national association of investment firms catering to Canadians. Member firms include investment and mutual fund dealers, exempt market dealers, portfolio managers, and investment fund managers. These firms offer products like mutual funds, exchange-traded funds, and prospectus-exempt products, as well as underwriting services.