Brady Fletcher, managing director of the TSX Venture Exchange, shares his thoughts on trends investors should watch for in 2018.
In a conversation with the Investing News Network on day two of PDAC 2018, Brady Fletcher, managing director of the TSX Venture Exchange, spoke about emerging commodities on the exchange.
“When you think about where some of those other trends are coming in, it’s in the blockchain space. I’m long-term blockchain technology bullish, and I think that application is going to be important. We’re [also] looking at what’s going on in life sciences and marijuana — that’s not just a Canadian trade, that’s international,” Fletcher said.
He added, “as we see various geographies start to legalize … I think the Canadian companies have the best access to capital; they have the scale to be able to have those international discussions, [and] then they have the science behind them to be able to negotiate with governments as well.”
When asked which commodities he thinks could take the market by surprise in 2018, Fletcher stuck by the cannabis and blockchain markets, along with energy metals as a whole.
“I’m not a CFA, I’m not here to give investment advice. But when you look at the energy consumption that those industries require, whether it’s for marijuana grow ops or for hashing with blockchain, or for charging electric vehicles, we need new sources of energy,” Fletcher explained. “I think the energy metals should have a positive year coming into 2018, 2019 or as those industries evolve.”
Watch the interview above for more insight from Fletcher, and click here to view our PDAC 2018 playlist on YouTube. You can also read the transcript below or click here to view our full PDAC playlist.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
INN: I’m here with Brady Fletcher, the Managing Director of the TSX Venture. Brady, how has PDAC treated you so far?
BF: Thanks Olivia, and it’s good to be here. PDAC this year is actually really exciting. You know, I think when we’re here last year, you really saw the number of people who were showing up and the energy that was going on and you can really sense a resurgence in the mining space. This year, we had $6.1 billion raised on Venture last year, 52% of that was actually in the mining space. And so you’re really starting to see that excitement from last year carry over to this year where people are turning drill bits and the number of people who are here in attendance talking about what’s happened to their companies in the last year. So, it’s really exciting.
INN: It’s funny I was just about to ask you, how are you feeling about the resource space as a whole right now?
BF: When you think about the resource space and especially when you walk around here, I think that we’re just at the early phases of this run because our average financing size last year was about $3 million, this year it’s up to about 4, so people have more capital to put to work. I also think that we’re early days in the diversified metals play. Because, you see Apple making announcements about them having to source cobalt, you look at the amount of copper that’s required for an electric vehicle, all of these metals have to come from somewhere, and 50% of all mining finance globally comes from us here in Canada on the TSX and TSX Venture.
I was also down at Polycon , and I was looking at all of the guys who were in cryptocurrency, and the big trends behind that, and everything that they’re talking about is the same thing that has attracted the gold bugs over the years. Some of those same fundamental principles are playing in and I think we’re seeing that excitement out here and today as well.
INN: I know resource stocks are big part of TSXV, but with that being said, there are a lot of companies that are in other sectors that are also part of that. So, where are you personally seeing the most growth right now?
BF: Interesting question. We have focused a lot on how do we expand and diversify our stock list. High number, we’re still probably 60% weighted to the mining space, as I mentioned before, over … half of financing activity last year went into the mining space. So I think that we will continue to see that growth, especially if the demand for diversified metals continues to grow the way that we’re seeing.
That being said, we are the world’s preeminent growth stage capital formation platform. There’s nothing like us out there and in terms of how we have capital pool companies, or vehicles that allow our company to efficiently yet access the public venture capital. Use that share currency to raise additional capital to grow, and use that share currency to make acquisitions.
We’ve enabled companies like Canopy Growth to get up in the last 3 years; they’ve gone from being a small CPC into a $6 billion public holistic company and then TSX index constituent. That’s what we’re really here to do. When you think about where some of those other trends are coming in, it’s in the blockchain space. And I’m long-term blockchain technology bullish, and I think that that applications can be important. We’re looking at what’s going on the life sciences and marijuana. That’s not just the Canadian trade, that’s international. So that as we see various geographies start to legalize in varying ways, I think the Canadian companies have the best access to capital. They have the scale to be able to have those international discussions, and then they have the science behind them to be able to negotiate with governments as well. I think, across the entire stock list from technology, through life sciences, through mining, we’re seeing a lot of really healthy indications right now.
INN: And on the note of cannabis, they’re saying that many cannabis and Blockchain companies are considered risky right now. What is the TSXV doing to educate investors and keep a standard protocol going among these companies?
BF: It’s kind of a funny question. What’s riskier? Is it the stake of property that somebody maps out in South America, or is it somebody who’s developing a technology in their parent’s basement?
At the end of the day, it really does come down to disclosure, and that’s where we as the Exchange focus. I’ve got 65 people across the country, and my listings and my compliance team that focus daily on how do we hold companies to a level of integrity. How do we make sure that they’re communicating what their business plan is, whether it’s a Blockchain company, or marijuana company, or a mining company.
Probably make sure that continuous disclosure obligations are met, and how do we make sure that we’re able to ensure the investing public knows what they’re looking at. So we do full background checks on management teams that list with us, we do have initial listing requirements that are tailored to each specific industry. And all those pieces allow us to maintain the integrity that brings global pools of capital to the venture exchange, to finance and grow those companies.
INN: Okay. So a lot of it circulates back to open communication and kind of keeping your eye on everything.
INN: Now, there’s been some talk as well that these Blockchain and cannabis companies are actually overshadowing mining companies right now. Do you feel that that’s the case?
BF: I hear that a lot. Blockchain and marijuana are definitely taking the headlines. All you need to do is look at the mining financing activity last year and the reality is it’s still over half of our business. Just on Venture alone, right. And the piece I think people lose sight of a little bit, is that when you were bringing capital into the markets, whatever company it comes into, that capital then serves looking at other opportunities.
So marijuana, blockchain, they’ve activated new pools of capital both from the U.S. and the millennial generation, and those new pools of capital are coming to the venture exchange and looking at, you know– how do we play other companies that are grown, that are using this framework to expand to become global players, and that I think is really exciting but positive for all companies that are listed with us. We’ve got 1,654 holistic companies that represent over $55 billion on market valuation and when that capital comes to our market, it looks at everything.
INN: Okay. Just to wrap things up, are there any dark horse commodities that you see taking the market by surprise as a success this year?
BF: I’d actually come back to the Blockchain and marijuana discussion for a second, and even electric vehicles. I’m not a CFA, I’m not here to give investment advice, but when you look at the energy consumption that those industries require, whether it’s for marijuana grow-ops or hashing with Blockchain, or for charging electric vehicles, we need new sources of energy. So I think the energy metals should have a positive year coming into 2018, 2019, or as those industries continue to evolve.