ShaneMcLean.com

Information on legal and business topics from Canadian business lawyer Shane McLean

CPC Combinations Part 2

Posted by Shane McLean on September 16, 2009

In early August I posted about CPC Combinations (here).  In that post I discussed the concept of combining a public shell company listed under the TSX Venture Exchange’s Capital Pool Company (“CPC”) Program with another existing public company (instead of the typical acquisition of a private entity).

With most CPC shell companies raising only the minimum of $200,000 on their initial public offering (which, when taken with the $100,000 in seed money, would leave the company with $300,000 less expenses after the IPO), many are finding that they do not have much purchasing power, either in terms of cash in the bank or overall valuation, to go after the really interesting target companies.  In order to help alleviate this problem, there is another type of CPC “combination” available in which two or more CPC shell companies combine together in order to pool their resources.

When the shell companies combine, each can only be given a value equal to its cash in the bank and the funds available to the combined company cannot exceed $2,000,000.   Most CPC shells are likely to combine in this way only if they have a target company lined up already since the combined entity has only 12 months post-combination to complete its “qualifying transaction”.

At a time when the list of CPC shell companies that have not announced a qualifying transaction is approaching 150 names, combining a few of them may help the prospects for finding attractive targets and also help the whole program by reducing the glut of shell companies out there.

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2 Responses to “CPC Combinations Part 2”

  1. Jessie said

    Hi Shane,

    I like this post and I could not agree with you more. I am wondering whether you have a list of CPC shell companies which have been successfully completed qualifying transactions.

    Do you think it is risky to invest in CPC-IPO?

    Thanks
    Jessie

  2. […]     CPC Combinations Part 2 (September 16, […]

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