There are several methods for a private company to become a public company – otherwise known as a reporting issuer under Canadian securities laws – and have its securities listed on a stock exchange in Canada. This is commonly known as the process of “going public”.
There are several paths to going public in Canada:
Conducting an initial public offering (IPO) of securities, following the filing of a prospectus, and obtaining a concurrent stock exchange listing.
Completing a reverse take-over (RTO) of an existing public company, which involves a private company with an existing business being acquired by a listed “shell” company, i.e., one without an active business but with public shareholders.
Variations on the RTO, including: The capital pool company (CPC) regime of the TSX Venture Exchange (TSXV), which involves a company getting listed with cash as its main asset, whose sole purpose is to find and acquire an existing private business, thereby taking that business public.
The special purpose acquisition company (SPAC) regime of the Toronto Stock Exchange (TSX) and the Cboe Canada. This resembles the CPC regime, but is aimed at larger private companies with more sizeable financing requirements.
Conducting a direct listing on a stock exchange without an associated offering of securities, which is among the least common methods of going public, but an area of recent interest.
Key Members of the Team
Chief Coordinator: Management Consultant / CFO
Capital Markets Lawyer
Investment Dealer
Auditor
Investor Relations
PREPARATION FOR A STOCK EXCHANGE LISTING
Going public can bring a level of excitement to a company that needs to be tempered as preparation is the key to a strong going public transaction. Therefore, this is the beginning and where you bring in your going public management consultant to work with you and your team.
1. DUE DILIGENCE:
It is advisable to get your due diligence organized. It will cover the majority of information needed by your auditor, lawyer, and investment banker. Upload the documents you have to a data room that can be accessible to your deal team and concurrently work on the rest of the required documentation.
2. COMPREHENSIVE BUSINESS PLAN:
The going public process requires ‘prospectus level disclosure’ that can be in the form of a prospectus, information circular, or a listing statement. Consequently, the core of this is a comprehensive business plan which will cover topics required for insertion into your ‘prospectus level disclosure’. Furthermore, a majority of the information will come from the due diligence discussed above.
3. PRESENTATION:
With the completion of the Due Diligence and Business Plan now is the time to put together a presentation or a pitch deck for marketing your opportunity to investment dealers, CPCs and shells for an RTO.
4. FINANCIAL STATEMENTS:
Prepare historical and forecasted financials which will give Investment Dealers and shells an idea of where you have been and where you expect to go. For forecasted financials, its important that you show your audience that you understand your market segment and its size as well as your cost of goods sold and your expenses.