Posted by Shane McLean on May 14, 2013
Each year the TSX Venture Exchange publishes a summary of its “new listings” activity. New listings include IPOs, qualifying transactions through the Capital Pool Company program, companies completing a reverse takeover and companies moving up from the NEX exchange or down from the TSX. Here are some random reflections after reviewing the data for 2012:
- In 2012 there were a total of 236 “new listings” compared to 334 in 2011. I would not think the reduction in new listings activity comes as a shock to anyone that works in or follows public markets in Canada.
- Of the new listings in 2012 there were 121 IPOs. 44 of those were traditional IPOs of operating companies (vs 47 in 2011) and the other 77 were IPOs of Capital Pool Companies (vs 112 in 2011). The rate of traditional IPOs is fairly steady year over year. The year over year drop in CPC formation would seem to line up with market sentiment over a good portion of 2012.
- In 2012 there were 61 CPC qualifying transactions completed on the TSXV compared to 87 during 2011. It would be interesting to know whether there is a causal relationship between this statistic and the drop in CPC formation during 2012. For example, did the drop in qualifying transactions in 2012 lead to a drop in interest in forming a CPC or was it the other way around? It is not possible to say from reviewing the publicly available data but with CPC formation and qualifying transactions accounting for 60-65% of new listings activity on the TSXV over the last couple years, any drop in CPC activity hurts the Exchange.
- In 2012 there were half as many Reverse Takeovers on the TSXV as in 20112 (18 in 2012 vs 36 in 2011). I would hazard a guess that this is closely tied to the general drop in investment activity that was felt by market participants in 2012. If doing an RTO will not open up new sources of funding for private enterprises it greatly reduces the incentive.
All in all, the 2012 TSX Venture Exchange new listing statistics do not reveal any surprises and seem to confirm what those of us who work with companies in the public markets felt in terms of market sentiment and availability of capital during much of 2012. Here’s hoping for a pick-up in 2013!
Posted in Capital Pool Company Program, Financing, Mergers and Acquisitions, TSX, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on April 17, 2013
The TSX Venture Exchange has announced a further extension of temporary private placement pricing measures that have been in place since last August. Subject to certain limits, terms and conditions, the temporary relief from TSX Venture Exchange pricing rules include the following, which are typically forbidden by the Exchange’s policies:
- Allowing a share/unit offering with an offering price below $0.05.
- Allowing a debenture offering with a debenture conversion price below $0.10.
- Allowing offerings involving a warrant with an exercise price below $0.10.
The Exchange has extended these measures until August 31, 2013 and has fine-tuned some of the conditions and requirements. If you would like to know more about these temporary relief measures please refer to the Exchange bulletin dated April 12, 2013 or contact Shane McLean (smclean@lwlaw.com).
Posted in Financing, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on February 21, 2013
Here is a link to a recent article in the Financial Post (http://business.financialpost.com/2013/02/19/just-done-an-ipo-here-are-some-common-mistakes-to-avoid/) which comes from the Ontario Securities Commission. It sets out some of the more common mistakes the Ontario Securities Commission has seen from newly listed public companies. The mistakes listed essentially boil down to: (i) not putting enough effort into compliance with rules and laws applicable to public companies; (ii) not understanding securities laws; and (iii) issues with disclosure, either by providing inappropriate disclosure or not providing disclosure on a timely basis.
I have seen a lot of issuers make a lot of mistakes and would put the disclosure issues at the top of the list in terms of importance. The other issues around the rules, securities laws etc. can often be dealt with by ensuring the company has good external advisors. In my view the disclosure obligations are something that management must really internalize and understand because, at the very least, they need to have a good sense of when to call on their external advisors for advice on whether and when disclosure is required.
Posted in Capital Pool Company Program, Law, TSX, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on February 12, 2013
I recently posted a list of the top 10 most popular posts from this blog and at #1 was one from May 2009 about the TSX Venture Exchange’s Capital Pool Company program. I have recently updated that post for the LW Connect Blog and here is the updated version:
The TSX Venture Exchange’s Capital Pool Company Program is increasingly becoming the dominant way to attain a public listing on the TSX Venture Exchange. The Exchange describes the program like this: “A unique listing vehicle, the Capital Pool Company program provides an alternative, two-step introduction to the capital markets. The CPC program introduces investors with financial market experience to entrepreneurs whose growth and development-stage companies require capital and public company management expertise.”
For those who are not familiar with the CPC Program, here is a quick high level overview:
- A group of people, usually between 4 and 6, get together and incorporate a company and form its board of directors. Together they invest at least $100,000 in seed money into that company with at least $5,000 each.
- The company has no assets other than the seed money and no operating business. Because of this you will often hear people referring to a CPC as a “shell” company.
- With the help of a banker the CPC shell completes an initial public offering. It must raise a minimum of $200,000 in gross IPO proceeds using a prospectus from at least 200 public shareholders. Following its IPO the CPC will trade on the TSX Venture Exchange. The process is not unlike a traditional IPO except that you have very little business and financial information to disclose because the CPC is relatively new company and has no business or assets (other than cash).
- Once the IPO is out of the way and the shares are listed on the TSX Venture Exchange, the sole purpose of the CPC shell is to seek out an operating business or other assets to acquire within 24 months from the initial TSX Venture Exchange listing date.
- Most often, the target business is acquired through a “reverse takeover” in which CPC shell most pays for the acquisition by issuing new shares to the owners of the target business. The “reverse takeover” part comes in because at the end of the day the total number of shares issued to the owners of the target often represents a majority of the outstanding shares of the public company on a post closing basis, meaning that the previous owners of the target now, as a group, control the overall company.
Why would anyone do this? For the founders and IPO investors of the CPC, the hope is that the target business will ultimately be very successful and their initial small investment will be returned to them many-fold. For this reason, the pressure is on the CPC founders to find a viable target with good prospects. For the owners of the target it is a way to obtain a public listing for their shares, eventual liquidity and it may provide the company with access to capital that is not available to it as a private company.
As you can imagine, there are far too many nuances, qualifications and details about the process to do it justice in this post. I plan to follow up with a series of posts dealing with aspects of the CPC program in a little more depth so stay tuned to LW Connect. If you have questions about the CPC program please feel free to give me a call ((613) 599-9600 ext 262) or send me an email (smclean@lwlaw.com). LaBarge Weinstein LLP has experience acting on both sides of these kinds of transactions (i.e. CPC shell and target).
Posted in Capital Pool Company Program, Financing, LaBarge Weinstein, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on January 23, 2013
Here is my latest post from the LW Connect Blog:
Amendments to Canada’s securities laws come into effect in February introducing a process referred to as “Notice and Access” for public company shareholder meetings taking place March 1, 2013 or later. The “Notice and Access” process provides issuers (other than investment funds) with the ability to deliver a prescribed form of notice to shareholders directing them to a non-SEDAR web site where they may access the balance of the meeting materials. This process should reduce both printing and mailing costs for issuers because they can avoid printing and mailing the meeting circular and financial statements to all shareholders. The Notice and Access is available for all types of shareholder meetings. For each issuer, it will be important to review its governing corporate statute (e.g. Canada Business Corporations Act, Ontario Business Corporations Act, etc) to determine if the Notice and Access process will meet all shareholder meeting notice requirements under such statute. For more information about Notice and Access please feel free to contact Shane McLean at smclean@lwlaw.com or (613) 599 9600 ext. 262
Posted in Law, TSX, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on January 22, 2013
I was reviewing the stats for this blog recently and thought it would be neat to list the top 10 most popular posts to date:
10. Update on the Ontario Emerging Technologies Fund (October 13, 2009)
9. CPC Combinations Part 2 (September 16, 2009)
8. From Wellington Financial -5 Pre Deal Questions to ask Your Venture Debt Lender (October 28, 2009)
7. Ontario Small Claims Court Limit Raised to $25,000 (January 13, 2010)
6. CPC Combinations Part 1 (August 9, 2009)
5. What are Preferred Shares? (July 2, 2009)
4. What is a Special Purpose Acquisition Corporation? (June 7, 2009)
3. Unanimous Shareholder Agreements (September 22, 2009)
2. Financing Term Sheet Basics (June 21,2009)
1. What is the Capital Pool Company Program? (May 28, 2009)
Since these posts continue to draw a lot of attention, my plan over the next several months is to review and update each one. Most of these date back 3 years and things change so they could use a refresh. Thanks for reading everyone.
Posted in Business Structure, Capital Pool Company Program, Financing, Law, Misc., Special Purpose Acquisition Corporations, Startup, TSX Venture Exchange, Venture Capital | Leave a Comment »
Posted by Shane McLean on January 14, 2013
Check out my latest post at the LW Connect Blog relating to the TSX Venture Exchange’s extension of temporary pricing relief until April.
Posted in Financing, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on December 13, 2012
Here is a copy of my latest posting at LWConnect, the LaBarge Weinstein LLP Blog:
A word of warning to any Capital Pool Companies considering the acquisition of a company or assets located outside of Canada and the United States: If your CPC is a reporting issuer in Ontario and the resulting issuer will not be a mining or oil and gas issuer, the disclosure for your transaction must be made by prospectus. Basically that means that rather than preparing a filing statement or information circular as you do with all other CPC qualifying transactions you will have to prepare a non-offering prospectus and file it with the Ontario Securities Commission for review. At that point, the OSC takes over the review of your disclosure and the TSX Venture Exchange’s review becomes an exercise limited to ensuring that the resulting issuer will meet TSX Venture Exchange listing requirements.
Given recent highly publicized scandals involving companies with foreign assets listed on Canadian exchanges, the OSC has been subjecting these transactions to a surprisingly high level of scrutiny, including review of the business and financial merits of the transaction. It can be debated whether this degree of scrutiny into the business/financial side of a deal by the OSC is appropriate, but it does seem to be the new way of things so CPCs looking at foreign qualifying transactions should be prepared.
Posted in Capital Pool Company Program, Law, Mergers and Acquisitions, TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on November 28, 2012
I have found that blogging is not unlike any other activity that you intend to do, know you should be doing and maybe even want to do (think of exercising). If you get into a routine it works great for a while but if you get out of that routine for some reason it’s easy for a great deal of time to go by before you even realize. It has been over 2 years since my last post to this blog. That’s hard to believe. Don’t get me wrong, I have been keeping busy — since my last blog post I have worked on over $130 Million in financings and about $640 Million in mergers and acquisitions. Having said that, I am going to try to get back into active blogging.
My firm, LaBarge Weinstein LLP, has set up a blog called LW Connect. I am going to focus most of my energies there. I will try to link to my LW Connect posts from this space (my most recent post is about temporary pricing relief measures from the TSXV) but I hope that you will visit LW Connect regularly and see not only my posts but posts from my colleagues as well. As always, if there are any topics that you would like to see discussed here or at LW Connect please let me know.
Thanks.
Posted in Financing, LaBarge Weinstein, Misc., TSX Venture Exchange | Leave a Comment »
Posted by Shane McLean on February 9, 2010
Last week it was announced that the Canada Pension Plan Investment Board would invest $400 Million in a “fund of funds” concept. That is, it looks like they are proposing to deploy $400 Million to existing private equity and venture capital firms so that they may, in turn, deploy that money as part of their own investing activities. The Montreal Gazette has a good write up about the announcement.
The fund of funds model is similar to the model employed by the Ontario Government and its co investors in the Ontario Venture Capital Fund which I blogged about last April (both the new CPP funds and the OVCF funds are both managed by Northleaf Capital Partners). The funding of the OVCF closed in June of 2008 and, as I understand it, it has yet to actually invest much money. Unfortunately, very little of that money has been put to work so far.
Let’s hope that the CPP’s fund of funds is able to deploy funds a bit faster. Without much needed capital, Canada’s knowledge based startups can’t get off the ground. Mark McQueen recently lamented on the Wellington Financial Blog that the wicket is open for tech IPOs but there isn’t enough “product” – i.e. quality tech companies of the right size and trajectory. Fund announcements like this may be too late to help launch companies that could take advantage of the IPO climate we face at the moment, but without a steady flow of funds to support generation after generation of knowledge based companies we will have a very hard time maintaining any kind of robust public (or private) market for tech companies in Canada.
Posted in Financing, Government Funding, Misc., Startup, Uncategorized, Venture Capital | Leave a Comment »
