Unprecedented market volatility and a surge in new public offerings in the first three months of 2021 drove TMX Group Ltd. to chart its strongest quarterly performance in a year.
Revenue for the stock exchange group rose by 14 per cent to $252-million, while net income leaped by almost 40 per cent year-over-year to $96.4-million for the quarter ended March 31. The company also announced a 10-per-cent hike to its quarterly dividend, to 77 cents a share.
TMX Group’s share price fell $1.41, or 1.1 per cent, to close at $133.23 on Wednesday.
John McKenzie, the company’s chief executive officer, told The Globe and Mail he expects the momentum in capital formation activity to continue into the second quarter of the year, given the number of companies that are expected to go public on the TSX and TSX Venture Exchange in the coming months.
“The pipeline of companies interested in raising new capital continues to be very strong. It’s difficult to have a long-term lens on this, but in the short-term there will be robust activity,” he said.
Last week, The Globe identified at least 15 issuers that are planning to go public on the TSX in the next few months, many of which included companies in the technology sector. Public listings in 2020 were also dominated largely by tech companies capitalizing on a surge in e-commerce and online use.
TMX Group derives much of its revenue from new listings on its various exchanges, as well as fees from trading activity. The company saw a 122-per-cent increase in the value of financing raised by issuers on the TSX and TSX Venture Exchange for the first quarter of the year, and a 50-per-cent increase in trading volumes.
In the first four months of 2021 alone, there were 68 new initial public offerings on the TSX, an increase of 39 per cent over the same time period last year. There were also 89 new issuers listed cumulatively in that time frame, including a slew of new bitcoin and ether exchange-traded funds.
Mr. McKenzie said the company’s diversified revenue stream contributed, in part, to the strong quarter. “If we see a pullback in trading volatility, it actually improves conditions for capital raising sometimes – you get more certainty on the price of your deal,” he said.
TMX Group also announced the acquisition of Tradesignal GmbH – a German-based software firm that provides algorithmic solutions for energy traders – to complement its European energy trading business, Trayport. Trayport’s revenue rose almost 11 per cent for the quarter ended March 31. Mr. McKenzie said the company is looking to expand its data analytics capacity, which might mean future acquisitions.
Mr. McKenzie also told The Globe that TMX Group will be moving to a “hybrid” work approach in the medium-term, which will give employees the option of combining office and remote work. “If some roles are suitable to be permanently remote, we will do that. But fully remote working doesn’t work in the long-term because you can’t engage and collaborate properly,” he said.
Meanwhile, TMX shareholders almost unanimously approved a decision by the company to endorse a shareholder proposal on Indigenous inclusion at the company’s annual meeting on Wednesday. The position taken by TMX, considered by shareholder advocacy groups to be a uniquely progressive one in corporate Canada, effectively means TMX will agree to develop internal programs and policies to foster equity for Indigenous employees and build relationships with Indigenous communities.
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Vanmala Subramaniam