EY analysis uncovers characteristics for delisting
VANCOUVER, July 19, 2016 /CNW/ - More than ten percent of mining and metals companies listed on the Toronto Stock Exchange and Toronto Venture Exchange delisted between 2014 and 2015, the most recent data available. According to a new EY report, M&A activity was the most common reason for delisting.
"It appears there's a direct correlation between the commodities boom and the listing of these companies," says Michelle Grant, EY's Mining & Metals Transactions Leader in BC. "When we set out to do the research we wanted to know if these companies were formed specifically to take advantage of the commodities boom, and why they ended up delisting."
EY's report, What is driving delisting in the mining and metals sector in Canada? 149 mining and metals companies delisted from the TSX and TSX-V in 2014 and a further 172 companies delisted in 2015. Several deals involved multiple listed companies joining together under one new public entity, and most included companies focused on gold. Other reasons for delisting varied:
- 40% due to M&A activity
- 37% on a voluntary basis
- 14% for a failure to meet continuous listing arrangements
- 9% due to formal insolvency proceedings
"One thing we learned from our research is that Canadian stock exchanges are still viewed as an important place for juniors to raise capital," says Grant. "For those who delist, our study shows that companies aren't turning to formal insolvency proceedings. They're moving to less prominent exchanges to preserve the ability to access the public markets."
The study focused on the 1318 companies listed in the mining and metals sector at the end of 2015. The majority of the companies that delisted were headquartered in British Columbia, which is not surprising as 50% of mining and metals companies in Canada are headquartered in BC. Resource equities were the worst performing asset class from 2011 to 2014.
For the complete study, click here.
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SOURCE EY (Ernst & Young)