Going Public in Canada
Accessing North American Capital
Markets
Going Public Abroad Conference – June 28, 2010
Jeffrey Singer
David Wismer
Raymond King
Stikeman Elliott LLP
BMO Capital Markets
TMX Group Inc.
Agenda
1. Introductions
2. A Capital Opportunity for Israeli Growth Companies
3. Going Public in Canada
4. The IPO Process and Regulatory Regime
Introductions
TMX Group - Global Leader in Equities
th
8 largest
exchange
group
By domestic market cap1
st
1
in North America
nd
2 globally
By number of issuers
1
th
6
largest
exchange
group
By equity capital raised2
1Issuers
2(WFE
SLIDE 3
on TSX and TSXV (WFE, Dec 2009)
and Capital IQ, Dec 2009)
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
BMO Financial Group and BMO Capital Markets
BMO Financial Group


Organization

Key Operating
Data
Global Banking Operations
Canada's first bank established in 1817
Offers broad range of retail banking, wealth
management and investment banking services
One of the largest diversified financial services
providers in North America
Market Cap
US$35 billion
Total Assets
US$372 billion
2009 Revenue
US$8.1 billion
Employees
36,200
Tier 1 Capital Ratio
12.5%
NORTH AMERICA
ATLANTA | BOSTON | CALGARY | CHICAGO | DALLAS | DENVER | HOUSTON |
LOS ANGELES | MEXICO CITY | MONTREAL
NEW YORK | SAN FRANCISCO | TORONTO | VANCOUVER
EUROPE
DUBLIN | LONDON | ZURICH | PARIS
HIGHLIGHTS
 209 equity transactions
totalling over $40 billion in
2009
 62 M&A transactions totalling
over $15 billion in 2009
ASIA
BEIJING | GUANGZHOU | HONG KONG | MUMBAI | SHANGHAI | TAIPEI
SOUTH AMERICA
RIO DE JANEIRO
AUSTRALIA
MELBOURNE
Note: BMO financials as at January 31st, 2010; Market capitalization as at June 15th, 2010
BMO Capital Markets’ Capabilities
ADVISORY SERVICES
 Mergers & Acquisitions
CORPORATE FINANCE
 Initial Public Offerings
DISTRIBUTION & TRADING
 Institutional Sales
TREASURY SERVICES
 Cash Management
 Strategic Advisory
 Follow-on Offerings
 Trading
 Risk Management
 Fairness Opinions
 Convertible Securities
 Equity Research
 Asset Management
 Takeover Defense
 Mezzanine Lending
 Fixed Income Research
 Foreign Exchange
 Share Buybacks
 High-Yield Debt
 Investor Marketing
 Trade Finance
 Valuation Analysis
 Investment-Grade Debt
 Investor Conferences
 Corporate Lending
 Account Sponsorship
 Securitization
 Retail Distribution
 Private Placements
SLIDE 4
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Stikeman Elliott
Number of Lawyers: Over 500
Offices: 8
Founded: 1952
Major Practice Areas:
M&A • Securities/Corporate Finance • Tax • Banking
Insolvency/Restructuring • Structured Finance • Energy
Corporate/Commercial • Real Estate • Project Finance
Infrastructure • Mining • Competition/Antitrust
Intellectual Property • Insurance • Employment
Technology/Outsourcing • Business Litigation
 Involved in 9 of the Top 10 Corporate Deals in
Canada for 2009, more than any other firm
(selected by Lexpert)
 #1 in Bloomberg’s league tables for Canadian
equity offerings (2005-2009), debt offerings and
global bond offerings (2009)
 #1 in the Financial Post’s league tables for
Canadian equity offerings and debt offerings
(2009)
 Top-ranked firm in corporate finance, capital
markets and M&A practice in International
Financial Law Review, Chambers Global and
PLC Which Lawyer?
SLIDE 5
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
A Capital Opportunity for
Israeli Growth Companies
Raymond D. King, MBA
Senior Manager, Global Diversified Industrials
Listings Business Development
TMX Group Inc.
Understanding the North American
Stock Markets Continuum
NYSE
•Senior listing standards
NASDAQ
• Disclosure rules
• Junior listing
standards
OTCBB
CNQ
•Minimal/No listing
standards
OTC - Pink
Sheets
SLIDE 7
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Market Comparison: TMX Group, AIM, NASDAQ
Market Data for 2009 (C$)
Number of Issuers Listed
TSX
TSX
Venture
TSX and
TSXV
AIM
Nasdaq
1462
2178
3640
1293
2852
$1,771.9
$35.8
$1,807.7
$100.8
$3,699.4
100
202*
302
36
131
$60.0
$4.8
$64.9
$9.8
$121.0
118.5
46.2
164.7
205.7
N/A
$1,398.4
$16.0
$1,414.4
$59.9
$33,061.8
191.3
5.3
196.6
4.0
3996.4
Quoted Market Value
(C$ Billions)
Going Public Activity
Equity Capital Raised
(C$ Billions)
Volume Traded
(Billions of Shares)
Value Traded
(C$ Billions)
Number of Trades
(Millions)
As at December 31, 2009
Source: TSX/TSXV Market Intelligence Group, AIM and Nasdaq Websites, WFE, Capital IQ
SLIDE 8
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
TMX Group Serves Companies at all Stages of Growth
Market capitalization
Toronto Stock Exchange and TSX Venture Exchange
93%
Unique feeder system
As at December 31, 2009
% of TSX Issuers
% of TSXV Issuers
35%
2036
Issuers
Issuers
<$50 Million
+ 73 M&A*
33%
32%
512
451
graduates
6%
472
Issuers
$50 - $250 Million
478
1%
127
Issuers
15
Issuers
>$250 Million
*From January 1, 2000 – December 31, 2009
Toronto Stock Exchange issuer base: 1,462 issuers, ~$1.8 trillion market cap
TSX Venture Exchange issuer base (excludes NEX): 2,178 issuers, ~$35.8 billion market cap
SLIDE 9
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
International Investment Community Trades
on Toronto Stock Exchange
25 International Brokers including














Barclays Capital
Citigroup
CSFB
Deutsche Bank
Goldman Sachs
HSBC
JP Morgan
Macquarie Capital Markets
Merrill Lynch
Morgan Stanley
Raymond James
Thomas Weisel
State Street
UBS
TSX Average Daily Volume
(Millions of Shares Traded)
220.9
242.7
255.6
2003
2004
2005
326.9
2006
382.1
2007
435.2
473.2
2008
2009
80 Canadian Brokers including:








BMO Nesbitt Burns
Canaccord
CIBC World Markets
GMP Securities
RBC DS
Scotia Capital Markets
TD Securities
National Bank Financial
SLIDE 10
~35% of TSX daily trading originates from
International brokers for their institutional
and retail clients
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Access to Capital: All time record year
for financing on TSX despite global market challenges
Equity Financing on Toronto Stock Exchange and TSX Venture Exchange 1997 to 2009
($ Billions)
70
64.9
60
60.0
52.2
50
46.2
40
30
20
25.9
25.9
25.5
15.5
19.2
23.1
19.2
27.3
22.0
25.8
31.5
32.5
29.1
28.4
0
1997
1998
1999*
49.7
47.6
40.8
41.8
35.3
20.9
11.1
15.5
10
58.8
2.4
1.1
1.4
2000
2001
2002
2003
Toronto Stock Exchange
*TSX Venture Exchange commenced operations on November 29 1999
4.1
2.4
2004
6.1
2005
TSX Venture Exchange
7.9
2006
2007
5.5
4.8
2008
2009
Canadian equity marketplace ideal
for small to mid-cap IPOs
Total IPOs in Canada and U.S.
Average amount raised during IPO (2009)
Can ad a
USA　233
187
U.S. markets:
US$396.8 million
TSX:
US$69.5 million
TSX Venture:
US$4.0 million
165
145
94
208
199
197
158
96
81
80
63
31
2003
2004
2005
2006
2007
2008
2009
Source: Hoovers IPO Central
SLIDE 12
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
TSX and TSX Venture Exchange
have shown consistent growth in liquidity
TSX Venture Exchange
Toronto Stock Exchange
Volume of Shares Traded
Billions of Shares
Volume of Shares Traded
Billions of Shares
52.6
43.6
118.5
109.2
46.2
96.1
37.1
82.0
64.2
21.1
2005
SLIDE 13
2006
2007
2008
2009
2005
BMO CAPITAL MARKETS
2006
|
2007
2008
STIKEMAN ELLIOTT LLP
2009
| TMX GROUP INC.
TMX Group Global Leadership Strengths
236 issuers
2nd in the world by number of companies
8 new listings in 2009
Technology
$0.698 B equity raised
$46.9 B value traded
136 issuers
7 new listings in 2009
$0.367 B equity raised
3640 issuers
302 new listings in 2009
Life Sciences
$6.6 B value traded
$64.9 B equity raised
Average Financing:
TSX $73.7 M
TSXV $2.2 M
123 issuers
11 new listings in 2009
$1.8 B equity raised
$6.5 B value traded
Clean Technology
All data is as of or YTD Dec. 31, 2009. All amounts are in Canadian dollars.
SLIDE 14
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Diversified Industries Sector includes
a broad range of companies
1038 issuers
$940 B Market Cap
81 new listings in 2009
Number of Companies by Diversified Industries Sector
Financial
Services, 122,
12%
CPC, 218, 21%
$27.5 B equity raised
Real Estate, 78,
8%
Comm. & Media,
51, 5%
Utilities &
Pipelines, 32, 3%
Forest Products,
24, 2%
Cons. & Ind.
Products &
Services, 513,
49%
SLIDE 15
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Advantages of Listing on TSX and TSX Venture












Canada is the market of choice for SME companies
– Diverse cross-section of listed companies in a variety of sectors
Sustained access to capital – steady growth of capital investment over past 5 years
Access to US capital without the higher cost of regulatory compliance
Ease of access to US market with Multijurisdictional program
Companies have recognized the benefits of listing or interlisting on TSX such as
analyst coverage, access to institutional and retail investors, liquidity and an
active secondary financing market
Strong trading liquidity – value traded has more than doubled over the past 5
years
Lower trading impact costs on TSX
Strong equity culture – 50% of Canadians hold equities
Analyst coverage typically seen at an earlier stage
Canadian regulatory commissions and exchanges are customer-focused
Standards-based exchanges that promote integrity for public SMEs
– Access to specialized products for TSX/TSXV listing (eg. Capital Pool Company
Program)
TSX provides listed companies unparalleled product and service support
SLIDE 16
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Going Public in Canada
David Wismer
Managing Director & Head of Technology
Investment and Corporate Banking
BMO Capital Markets
Market Analysis
5 Year Index Performance
Composition of Canadian IPO’s – Last 5 Years
By Value
Energy
27%
Mining
17%
170
160
Technology
4%
150
140
Relative Return (%)
130
20.5%
120
Other
52%
110
100
(6.4%)
By Number
(7.5%)
90
Energy
30%
(9.6%)
80
70
60
Technology
6%
50
Jun-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10
S&P/TSX Index
S&P 500
MSCI World Index
Mining
24%
MSCI EAFE Index
Other
Source: Bloomberg
Source: BMO Capital Markets
40%
TSX has outperformed major global indices over past 5 years;
IPO activity focused on Mining and Energy sectors
SLIDE 18
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
TSX Equity Issuance Breakdown

3,310 transactions in past 5 years raising
over $226 billion
3,639 transactions including structured
products raising over $248 billion
–

IPO vs. Follow-on Offerings ($ Value) (1)
IPO
10%
223 IPOs completed in past 5 years
raising over $21 billion (excluding
structured products)
Follow -on
90%
1. Excludes structured products.
Bought vs. Marketed ($ Value) (1)
Bought
64%
Marketed
36%
Source: BMO Capital Markets
Note: Transactions from 2005-Present
1. Excludes structured products
Type of Security ($ Value)
Convertible
Debentures
9%
Structured Products
9%
Preferred Shares
11%
REIT / Trust Units
19%
Common Shares
51%
(1)
1. Includes Flow-Through Shares.
TSX provides issuers with access to various types of capital post-IPO;
Follow-on bought deals provide issuers with pricing and execution certainty
SLIDE 19
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Overview of Market Participants in
Canadian Equity Capital Markets
Bank-Owned Dealers
BMO Capital Markets
CIBC
National Bank Financial
RBC Capital Markets
Scotia Capital
TD Securities
Global Dealers
Independents
ABG Sundal Collier
Bank of America Merrill Lynch
Citi
Credit Suisse
Deutsche Bank
Goldman Sachs
HSBC Bank
Jefferies Group
JP Morgan
Macquarie Group
Morgan Stanley
Thomas Weisel Partners
UBS
Canaccord Financial
Cormark Securities
Dundee Securities
FirstEnergy Capital
Genuity Capital Markets
GMP Securities
Hayw ood Securities
Jennings Capital
Paradigm Capital
Peters & Co
Raymond James & Associates
Roth Capital Partners
Wellington West Capital Markets
59%
21%
20%
2009 Market2009
Share
(based
on $ volume)
Market
Share
(based on $ volume, new equity and equity-linked issuances)
Canadian bank-owned dealers have significant market share
SLIDE 20
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Key IPO Considerations
Valuation



Investment Thesis
Comparables
Price
IPO Discount




Market tone generally
Flow of funds
Perception of sector
IPO activity and aftermarket performance
Market Environment

DEMAND
Structure





Offering size
Use of proceeds
Treasury vs. secondary
Governance
Capitalization
Lock-ups





U.S. and / or Canada
SEC-registered vs. 144A
Listing venue(s)
Distribution strategy
Syndicate structure
Investor Base

Success of offering dependent on a balance of several factors
SLIDE 21
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
IPO Sizing Considerations
IPO - Size of Offerings – TSX Issuers
(1)

$700
$600
Issuers requires sufficient
public float to:
–
provide appropriate
share trading liquidity
–
maximize demand on the
offering by appealing to
largest group of investors
–
attract research analyst
coverage
–
optimize valuation
$500
$400
$300
$200
$100
$-
IPO Size as Percentage of Market Capitalization – TSX Issuers
(1)

Treasury versus secondary
components to consider

Average IPO size on TSX over
past 5 years is ~$95 million
while median is ~$60
million(1)

Most IPOs sell approximately
25% to 50% of their market
capitalization
100%
80%
60%
40%
20%
-Source: Dealogic
1. IPOs with market capitalization between $50MM – 1.0Bln, from 2005 - Present
Appropriate IPO sizing required to successfully launch offering
SLIDE 22
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Listing Considerations
Issues
Considerations



TSX Listing




Dual-Listed
Cross-Border
Offering

Short and defined regulatory review
process (~3 months)
Access to U.S. investors via private
placements with qualified institutional
buyers (governed by SEC Rule 144A)
Qualified issuers can use Multijurisdictional
Disclosure System for future offerings;
allows Canadian issuers to avoid SEC filings
by using existing Canadian public disclosure
documents to issue securities to the public
in the U.S.
Quick on-going access to capital via bought
deals
Expenses: ~US$1.0 - 2.0MM (excluding
underwriting fees)

Optimizes North American demand
Maximizes research coverage
Expenses: ~US$2.5 - 3.0MM (excluding
underwriting fees)




Conclusion
Limited access to U.S.
investor base due to SEC
Rule 144A
Greater exposure and
coverage following IPO for
small and mid-cap issuers

A viable alternative
given timing, cost
and size
considerations
Cumbersome and
lengthy SEC regulatory
process (approximately
12-14 weeks once filed)
SOX compliance
Cost of managing and
coordinating two listings

Incremental benefits
of dual listing but
with additional costs
and uncertain
timetable
Issuer has to be
sufficiently large to
justify dual listing

Choice of listing will depend on numerous variables and considerations
SLIDE 23
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Indicative Distribution Strategy
Distribution Strategy
Allocation

Marketed to all major investors in North America,
and key European investors

Approximately 80%-90% of offering

Allocation of shares based on quality of orders


Generate maximum institutional and retail demand
through focused, comprehensive marketing schedule
Institutions form the foundation of demand and will
drive pricing

North American geographic concentration
–


Comprehensive coverage through coordinated
marketing by bookrunners
Position IPO’s as a compelling investment
opportunity and differentiate from comparable
public companies
Institutional Investors:
Retail Investors:

Approximately 10%-20% of offering

Generate secondary market trading and liquidity,
creating positive pricing tension
Build deal tension to maximize demand
4 - 5 days
4 - 5 days
3 - 4 days (if desired)
TSX IPO’s are marketed internationally,
shares allocated seamlessly based on quality of demand
SLIDE 24
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Key Investors in Canadian Technology Companies
Top 30 Institutions
Value
Fidelity
BlackRock
TD
Janus Capital Management
Invesco
Greystone Managed Investments
RBC
Jarislowsky Fraser
Mackenzie Financial
McLean Budden
Caisse de Depot et Placement du Quebec
BMO
BCIMC
PRIMECAP Management Company
Wellington Management Company
Orbis Investment Management
I. G. International Management
Connor, Clark & Lunn
Gilder Gagnon Howe & Co.
Marsico Capital Management
CIBC
Edgewood Management
Montag & Caldwell
Columbia Management Advisors
Jones Heward
OppenheimerFunds
GWL Investment Management
AllianceBernstein
UBS
Goodman & Company
Total / Average
$2,935
$2,096
$1,755
$1,583
$1,254
$1,184
$1,117
$990
$932
$915
$697
$630
$626
$569
$565
$495
$490
$459
$453
$448
$423
$418
$415
$380
$377
$373
$371
$365
$354
$353
$24,022
Current
# of Shares
Holdings
Held (mm)
122.9
64.3
39.5
25.5
46.0
52.7
28.9
47.2
78.3
21.9
26.6
19.8
23.4
13.1
17.2
7.2
21.2
23.5
8.7
6.5
18.1
6.1
6.1
11.3
17.5
6.2
9.6
5.3
14.8
15.3
804.6
22
18
18
3
19
6
12
4
17
4
7
13
23
2
8
1
15
18
2
2
15
1
1
8
16
4
16
3
17
12
307
Avg.
Holding Size
$133
$116
$98
$528
$66
$197
$93
$248
$55
$229
$100
$48
$27
$285
$71
$495
$33
$25
$227
$224
$28
$418
$415
$47
$24
$93
$23
$122
$21
$29
$151
Value
Mar-09
# of Shares
Holdings
Held (mm)
$2,152
$1,422
$2,185
$1,919
$889
$15
$684
$476
$481
$653
$494
$441
$467
$466
$197
-$332
$386
$429
-$222
$301
$344
$269
$211
$483
$330
$117
$277
$208
$16,851
97.2
50.2
63.9
36.4
32.5
0.9
19.7
42.6
55.3
21.7
28.4
17.5
23.4
13.2
5.9
-16.3
26.1
7.6
-17.7
5.3
6.0
12.8
17.6
8.6
14.8
2.2
17.7
8.7
670.2
23
19
13
3
15
12
12
15
16
4
8
11
23
2
8
-13
17
2
-16
1
1
9
13
2
15
4
16
9
302
Avg.
Holding Size
$94
$75
$168
$640
$59
$1
$57
$32
$30
$163
$62
$40
$20
$233
$25
na
$26
$23
$215
na
$14
$301
$344
$30
$16
$242
$22
$29
$17
$23
$107
Change
# of Shares
Holdings
Held (mm)
25.7
14.2
(24.4)
(10.9)
13.5
51.8
9.2
4.6
23.0
0.1
(1.8)
2.3
-(0.1)
11.3
7.2
4.9
(2.7)
1.1
6.5
0.4
0.8
0.0
(1.5)
(0.1)
(2.4)
(5.2)
3.2
(3.0)
6.6
134.5
(1)
(1)
5
-4
(6)
-(11)
1
-(1)
2
---1
2
1
-2
(1)
--(1)
3
2
1
(1)
1
3
5
Note: Canadian technology companies includes 20-20 Technologies, Aastra Technologies, Absolute Software, Axia NetMedia, Ballard Power Systems, Bridgewater Systems, CAE, CalianTechnologies, Celestica, CGI, COM DEV, Computer
Modelling Group, Constellation Software, Cortex Business Solutions, Descartes Systems Group, DragonWave, Dynex Power, Electrovaya, Enghouse Systems, Evertz Technologies, EXFO, Fluid Music, Gennum, GuestLogix, Intermap
Technologies, Macdonald Dettwiler & Associates, March Networks, Mediagrif Interactive Technologies, Miranda Technologies, MKS, MOSAID Technologies, Open Text, Peer 1 Network Enterprises, PNI Digital Media, Pure Technologies,
Redknee Solutions, Research In Motion, RuggedCom, Sandvine, SENSIO Technologies, Sierra Wireless, SXC Health Solutions, Tranzeo Wireless Technologies, Vecima Networks, Webtech Wireless, Wi-LAN and Zarlink Semiconductor
Source: Thomson, Capital IQ
A global investor base, led by U.S. institutions
SLIDE 25
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Accessing Nasdaq Subsequent to a TSX IPO
Select Share Price Performance – 5-Years Post Listing
TSX
Nasdaq
718%
165%(1)
712%
154%
120%
104%
6% (1)
(12%)
Listing Date
Time Gap
Apr-2007
Oct-2009
30 months
Oct-1997
Feb-1999
16 months
May-1999
Sep-1999
Nov-1989
4 months
Oct-1992
35 months
1. Share price performance is from time of listing to June 15, 2010.
Several successful companies have gone public on the
TSX and subsequently listed on Nasdaq
SLIDE 26
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Research Analyst Coverage on the TSX
Average Number of Analysts - TSX
10
7
6
5
4
3
$50 - $100
Number of Companies
91
$100 - $200
124
$200 - $300
83
$300 - $400
$400 - $500
$500+
51
33
294
Market Capitalization (US$MM)
Source: Bloomberg
TSX-listed companies enjoy strong research coverage, irrespective of company size
SLIDE 27
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
The IPO Process and Regulatory Regime
Jeff Singer
Partner
Stikeman Elliott
The Decision To Go Public
 Typically common equity capital at more attractive multiples
than private equity
 Liquidity for existing shareholders
 Improved opportunities for future equity financings
 Equity represents liquid acquisition currency
 Broader opportunities for management equity incentive
arrangements
 Enhanced public profile
SLIDE 29
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Methods for Going Public on
Toronto Stock Exchange or TSX Venture Exchange
SLIDE 30
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Securities Regulation in Canada
 Regulation matter of provincial and territorial jurisdiction,
although highly harmonized
– Securities Acts & Regulations
– National Policies
– National Instruments
– Multilateral Policies & Instruments
 Ability for Israeli company to choose "principal regulator"
– Passport System
 Offerings in Quebec may be subject to certain additional
requirements, most notably French translation of offering
documents
SLIDE 31
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
Offering Process
Steps Involved
Preparing the Story

Select advisors & underwriters


Extensive discussions with management and shareholders to understand the company’s unique attributes and objectives
Selection of independent directors

Prospectus drafting, crafting management presentation and marketing materials, develop marketing plan, review of
existing contracts & incentive plans


Determine optimal issue size as well as pricing range and valuation
Consideration of reporting & control systems and modifications to corporate / tax structure

Set timetable and marketing schedule
Syndicate Selection

Syndicate developed to promote/reward research, institutional and retail distribution
Institutional Investor
Targeting

Comprehensive targeting effort to identify potential buyers

identify investment criteria for each investor

target sophisticated investors who have an understanding of the sector
Pre-Marketing


Educate salesforce on the company’s key selling points
Determine potential investor interest to help schedule one -on-one meetings

internal sales documents and conference calls, dry-run roadshow presentation
“Kick-Off”



Roadshow “kick-off” with institutional sales forces of underwriting syndicate
Address investor issues for roadshow discussion
Maintain momentum of offering and increase awareness of offering
Roadshow

Large majority of demand generated will come from one-on-one meetings with portfolio managers at targeted
institutions
Group functions will enable lower priority investors to learn about the company and ask questions directly to
management
Structuring the Offering

Feedback and
Communication



Timely follow-up with investor base to determine investor concerns and assess demand
Daily feedback with management to update on status of offering and refine roadshow presentation
On-going calls to co-managers to share information
Pricing and Allocation



Develop detailed knowledge of book of demand to optimize pricing decision
Allocate shares based on expressed interest in transaction, one -on-one meetings, past buying, after market demand,
pricing parameters and the company’s strategic objectives
Retail allocations to syndicate to create a balanced offering


Active trading presence, on-going research coverage, investment banking advisory
Provide advice regarding investor relations program
After Market
Sponsorship
SLIDE 32
BMO CAPITAL MARKETS
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STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
The IPO Process
Investment
Dealer
Engagement
File Preliminary
Prospectus
Pricing & File
Final Prospectus
Deliver Funds
Week 0
Week 6
Week 10
Week 12
Company
Preparation
Preparation
•
•
•
•
Prepare prospectus
Due diligence
Tax/structuring
Financial statement
preparation and analysis
• Capital structure
• Prepare marketing materials
• Syndication
Marketing
• Roadshow
• Prepare underwriting
agreement
• Settle comments with
Securities Commissions
• TSX conditional listing
Closing
Public
Company
• Sign underwriting agreement
• Finalize legal documents
• Transfer of funds
Process can be as fast as 12 – 13 weeks
Largely depends on level of preparedness of issuer
SLIDE 33
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
The Prospectus
 Principal disclosure document
 Must contain all material information concerning the business
and securities offered
 Financial information
– Audited financial statements
 2 years of balance sheets
 3 years of income statements, statements of retained earnings
and statements of changes in financial position
– Stub period unaudited interim financial statements
– Management's Discussion & Analysis
– Significant Acquisition Disclosure
SLIDE 34
BMO CAPITAL MARKETS
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STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
On-going Disclosure Obligations
 Financial Reporting
– Annual audited financial statements (90 days TSX / 120 days TSXV)
– Interim unaudited financial statements (45 days TSX / 60 days TSXV)
– Management's discussion and analysis (MD&A)
– CEO / CFO certification
– Audit committee disclosure
 Annual Information Forms
 Annual Meetings, Management Proxy Circulars & Corporate





Governance Disclosure
Material Change Reports
Business Acquisition Reports
Documents Affecting Rights of Securityholders
Material Contracts
TSX Filings
SLIDE 35
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
QUESTIONS & ANSWERS
Jeffrey Singer, Partner
Stikeman Elliott LLP
Tel: +1 416 869 5656 jsinger@stikeman.com
David Wismer, Managing Director
BMO Capital Markets Corp.
Tel: +1 416 359 8088 david.wismer@bmo.com
Raymond King, Senior Manager
TMX Group Inc.
Tel: +1 416 947 4675 raymond.king@tsx.com
Appendix
TSX Original Listing Requirements
Minimum Listing
Requirements
TSX Non-Exempt Issuers
TSX Non-Exempt Issuers
TSX Exempt Issuers
Forecasting Profitability
Profitable Issuers
Industrial Companies
Earnings or Revenue
Evidence of pre-tax earnings from
on-going operations for the current
or next fiscal year of at least
$200,000
Pre-tax earnings from on-going
operations of at least $200,000 in
the last fiscal year
Pre-tax earnings from on-going
operations of at least $300,000 in
the last fiscal year
Cash Flow
Evidence of pre-tax cash flow from
on-going operations for the current
or next fiscal year of at least
$500,000
Pre-tax cash flow of $500,000 in
the last fiscal year
Pre-tax cash flow of $700,000 in
the last fiscal year, and an average
of $500,000 for the past 2 fiscal
years
$7,500,000
$2,000,000
$7,500,000
Net Tangible Assets
Adequate Working Capital
and Capital Structure
Working capital to carry on the business, and an appropriate capital structure
Management and Board of
Directors
Management, including the board of directors, should have adequate experience and technical expertise relevant
to the company’s business and industry as well as adequate public company experience. Companies are required
to have at least two independent directors
Public Distribution and
Market Capitalization
Sponsorship
1,000,000 free trading public shares
$4,000,000 held by public shareholders
300 public shareholders each holding a board lot
Generally required
Not required
Source: Stikeman Elliot LLP, “Going Public in Canada: Issues and Considerations Associated with an Initial Public Offering,” June 2009
SLIDE 38
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.
IPO Treasury vs. Secondary Mix
Select Canadian Technology IPOs – Treasury/Secondary
Select US IPOs – Treasury/Secondary
Treasury Average: 49.0%
Treasury Average: 74.7%
March Networks
Changyou.com
Ascalade
Bridgepoint Education
Vcom
Rosetta Stone
Miranda
DigitalGlobe
Constellation
SolarWinds
Corel
OpenTable
Evertz
JumpTV
LogMeIn
Sandvine
CDC Software
Hostopia
Avago Technologies
Dragonwave
Shanda Games
RuggedCom
Ancestry.com
TeraGo
Fortinet Inc
Redline
Archipelago Learning
Bridgewater
0%
40%
20%
Treasury
60%
80%
100%
0%
20%
40%
Treasury
60%
80%
100%
Secondary
Secondary
Meaningful amount of secondary offering possible to
increase float / liquidity for investors
SLIDE 39
BMO CAPITAL MARKETS
|
STIKEMAN ELLIOTT LLP
| TMX GROUP INC.