Dear Shareholders and Investors.
Just prior to the Christmas/New Year break, the TSX Venture Exchange put out a White Paper covering many of the irritant issues faced by listed companies, and their shareholders, and what the Exchange intends to do to address these issues.
We are all aware that the Junior Market appears broken, as evidenced by the Venture Exchange Index, and many investors have abandoned the resource sector, or the markets in general, as they have lost a significant amount of their investment capital. Not only that, but companies appear locked into a vicious downward spiral of lower prices and increasing share issuances.
Very few investors realize that due to the mandates from the various Securities Commissions to allow for competition in the market, a number of exchanges now operate in Canada in competition to the TSX-V and TSX, and one more is proposed. This has removed the level playing field investors once enjoyed and caused two significant occurrences.
First, the shorting uptick rule has been removed so anyone can short stocks at anytime with no repercussions, to the detriment of investors and the market. Not only that, but many shorts are apparently naked shorts, and not reported.
Second, market transparency has disappeared, as, unless one subscribes to all the exchange feeds, at a considerable cost, very few investors are able to make head nor tail accurately of just what the bid/ask is, and effect trades with that knowledge.
As President of Bayhorse Silver Inc, I must represent our shareholders interests as best I can to the Exchange to ensure we have a transparent market where all shareholders have equal access to trading information, and no one person, or group, is favored over another. Only in that way can we level the playing field for all.
Accordingly, I have sent the following letter to the TSX-V Exchange, on behalf of our shareholders, in response to the White Paper.
TSX Venture Exchange January 4, 2016
650 West Georgia Street
Vancouver, BC, V6B 4N9
Re: White Paper: Revitalizing TSX Venture Exchange
Attention: John McCoach
I have reviewed the White Paper prepared by the Exchange, and while I applaud the Exchange for taking note of, and addressing many of the irritants present in our markets, in my opinion however they are akin to “rearranging the deck chairs on the Titanic”, as they do not address the major issue, Predatory and Manipulative trading practices on the Exchange.
Unless investors and shareholders have confidence the Exchange will protect the companies and the investing public from predatory and manipulative practices, the companies will cease to exist, as will the Exchange.
The first thing your White Paper states is: The public venture market community in Canada has long been recognized as the premier ecosystem in the world for supporting the ambitions of entrepreneurs and the success of early-stage public companies.
It then refers to the interconnected community of stakeholders, which includes entrepreneurs, investors, financiers, brokerage firms, securities lawyers, accountants, industry professionals and regulators.
Other than the entrepreneurs, all other stakeholders noted above derive their living from the money and energy that is created by these entrepreneurs and funded by the investors that believe in their endeavors.
The entrepreneurs, not the professionals, are the ones that should be listened to because it is their energy, drive, and acumen that is at the heart of the Exchange, and this entrepreneur asks the question;
Why are so many companies listed on the Exchange in difficulty, having to constantly issue shares at lower prices to survive, in death spiral financings.
This is not about the “Zombie Companies” Despite the current market conditions, there is a reason the so-called Zombie Companies have developed.
The predatory trading practices of those who manipulate the small cap markets for their own gain, against the general good.
What one single change should be made that can reverse this trend, provide for the needs of the companies, and bring back confidence in the integrity of the Exchange.
Simple. ELIMINATE SHORTING on the TSX-V.
If the TSX Venture Exchange is meant to provide a platform for companies to raise money, prosper and grow; how can they do that if someone is continually shorting their stock? Especially in a small cap market.
How can the Exchange prosper if their clients, the listed companies, are continually being ground down?
The ability to Short companies shares on the TSX Venture Exchange is giving the shorts the ability to wage unrestricted economic warfare against companies and management that have no effective defense to the shorts tactics.
The second simple thing that will change the game is to raise the minimum board lot. Once, a hundred dollars was considered a lot of money. Not anymore. Establish new board lot trading parameters. A board lot under one dollar, – 1,000 shares. Under 20 cents – 5,000 shares. Under 10 cents – 10,000 shares, 5 cents and under- 20,000 shares. This one move alone will minimize the damage caused by the numerous 1,000 share downticks that drive share prices down, by making the trade more expensive. After all, what purpose do these low cost, low volume downticks serve?
If an investor cannot afford a $1,000 dollar investment, then maybe that investor should not be in the market.
What is more important? The health of the companies trading on the Exchange, and by extension the Exchange, or those that feed off the Exchange. I believe these two changes will eliminate many of the issues contributing to problems we are experiencing today.
In my opinion the health of the companies is more important as, if they are healthy, only then can they foster a thriving support industry. The other stakeholders do not create the wealth, but they certainly cannot thrive without the wealth that the entrepreneurs create.
There is a war of attrition going on as everyone tries to capture the now very scarce investment dollars. There are now so few independent investment houses that competition in the market has disappeared, leaving the field to the banks, which by their nature will not support the junior markets.
The listed companies are the heart and soul of the Exchange and their health should be paramount, because they attract investors who help create wealth. For Everyone! If this simple fact is not understood, then I see no hope for the future.
President & CEO
Bayhorse Silver Inc