Quebec companies shun capital markets

A new survey is sounding the alarm on the plummeting portion of Quebec companies listing on Canadian stock exchanges.

The study released yesterday by Fraser Milner Casgrain LLP and PricewaterhouseCoopers shows that companies in the province accounted for 26 per cent of new listings on the TSX Venture Exchange in 2004-2005. That number has since taken a nosedive, dropping to just nine per cent in 2008-2009. The decline is particularly distressing when you consider that Quebec makes up 23 per cent of Canada’s population, and 21 per cent of the country’s economy.

“We know that companies that will really grow and create jobs are those that are well capitalized,” FMC president Michel Brunet tells Legal Feeds. He adds that the province must pursue a growth policy that targets companies that are best positioned to grow quickly.

The survey flowed from interviews with about 60 senior executives from private companies, public companies, private investment funds, and brokers. The authors believe it offers decision-makers a sophisticated look at the circumstances that have led to the trend, and presents solutions to reignite economic growth in the province. They say a quick fix is particularly important in light of Quebec’s aging population and the government’s rebalancing of public coffers due to high debt levels.

The report recommends the following key steps to help turn the situation around:
• Conditions must be created to ensure liquidity on the TSX Venture Exchange;
• capital gains must be eliminated for those who purchase shares of qualifying companies and later sell them;
• the misperception among owners of private companies that going public is inconvenient must be corrected;
• levels of entrepreneurship within the province must increase.

PwC managing partner Guy Leblanc acknowledged that listing on the stock exchange is not a cure-all for Quebec businesses, but it is generally viewed as a positive step.

“The executives questioned are unanimous that listing on the stock exchange is certainly not a panacea and creates pressure on operations due to regulatory requirements of disclosure and accountability, but they also say that the contribution of public capital allowed them to grow quickly when they could not have achieved this otherwise,” he said in unveiling the report.

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