Can Spending Time in the Minors Pay Off? An Examination of the Canadian Junior Public Equity Markets

This paper tests whether the junior public equity markets serve as an effective development market for early-stage firms compared to private venture capital (VC). Focusing on the Canadian market, we compare the long-run stock performance of firms that graduate from the Toronto Venture Stock Exchange (TSX-V) to the Toronto Stock Exchange (TSX) against the performance of VC-backed firms that have a direct IPO on the TSX. Controlling for various confounders and possible selection biases, we find that TSX-V graduations significantly outperform VC-backed IPOs by 28.2 percentage points in the three years following the TSX listing. Our results are consistent with the idea that a TSX-V listing provides the insiders of early-stage companies with valuable public-markets experience.