Going Public on TSX Venture
Welcome & Overview of Public Capital
Louis Doyle
Vice-President, Montreal,
Listed Issuer Services
TSX Venture Exchange
Agenda
2
1:30 pm
Welcome and Overview of Public Venture Capital
Louis Doyle, TSX Venture Exchange
1:50 pm
Case Study
Keith Abriel, Immunovaccine Inc
2:15 pm
Basics of Going Public
Allan L. Jenkins, PricewaterhouseCoopers, LLC
Glenn Jessome, Jessome Law
Scott Urquhart, Jennings Capital
Kevin G. Redden, Nova-Scotia Securities Commission
3:05 pm
Coffee Break
3:20 pm
CPC Workshop
Richard Gordon, Oceanus Resources Corporation
James D. Nicoll, PricewaterhouseCoopers, LLC
4:10 pm
Questions & Answers
4:30 pm
Networking Reception
Disclaimer
This document is for information purposes only and is not an invitation to purchase securities
listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange. TMX
Group Inc. and its affiliates do not endorse or recommend any securities referenced in this
document. Please seek professional advice to evaluate specific securities.
While the information herein is collected and compiled with care, neither TMX Group Inc. nor
any of its affiliated companies represents, warrants or guarantees the accuracy or the
completeness of the information. You agree not to rely on the information contained herein
for any trading, business or financial purpose.
This information is provided with the express condition, to which by making use thereof you
expressly consent, that no liability shall be incurred by TMX Group Inc. and/or any of its
affiliates as a result of any errors or inaccuracies herein or any use or reliance upon this
information.
© 2010 TMX Group Inc.
3
TMX Group is a Multi-Asset Class Market Leader
Equities
Derivatives
(53% Ownership)
(19.9% Ownership)
Fixed Income
Energy
Data
(47% Ownership)
4
State of the Public Capital Markets in Canada
+128% +533% +77%
New Listings on TSX
(105 vs 46)
+94%
New Listings on TSXV
(192 vs 99)
5
Number of IPOs on TSX
(19 vs 3)
Value of IPOs on TSX
($5.2B vs $2.9B)
$29B $832M
New equity financing
raised on TSX & TSXV
All Data is YTD July 31 2010 and compares against YTD July 31 2009
New Clean Technology
equity financing raised
on TSX & TSXV
TMX Group - Global Leader in Equities
th
7largest
exchange
group
By domestic market cap1
st
1
in North America
nd
2 globally
By number of issuers1
1Issuers
6
2(WFE
on TSX and TSXV (WFE, June 2010)
and Capital IQ, Dec 2009)
th
6
largest
exchange
group
By equity capital raised2
The North American Stock Markets Continuum
NYSE
•Senior listing standards
NASDAQ
• Disclosure rules
• Junior listing
standards
OTCBB
CNSX
OTC - Pink
Sheets
7
•Minimal/No listing
standards
TMX Group Lists Companies at all Stages of Growth
8
Market Snapshot: TSX and TSXV
Market Data for June 30, 2010 (C$)
Number of Issuers Listed
TSX
TSX
Venture
TSX and
TSXV
1488
2177
3665
$1,758.8
$37.8
$1,796.6
94
155
249
$21.9
$3.7
$25.6
$686.1
$13.7
$699.8
95.3
3.9
99.2
Quoted Market Value
(C$ Billions)
Going Public Activity
Equity Capital Raised
(C$ Billions)
Value Traded
(C$ Billions)
Number of Trades
(Millions)
9
As at June 30, 2010
*NASDAQ Information does not include secondary financings
Source: TSX/TSXV Market Intelligence Group, AIM and Nasdaq Websites, WFE, Capital IQ
Unique Equity Market Structure
2,177 companies
20 graduates in First Half 2010
20 graduates in 2009
45 graduates in 2008
1,488 companies
TSX Venture Exchange
Toronto Stock Exchange
• Access to capital for earlier stage companies
or smaller financings
• Senior market for well established
businesses and management teams with
experience in public markets
• Total market cap of $38 Billion & average
market cap of $17.4MM
• Cost effective stepping stone for international
companies looking to list on a quality North
American market
• Exchange mandate to mentor management of
newly public companies
• Streamlined graduation to TSX when senior
market requirements are met
• 103 year history
10
• Total market cap of $1.8 Trillion & average
market cap of $1.2B
• 30% of TSX issuers >$500M are interlisted on
a US exchange
• Access to larger, more international
institutional investors and greater analyst
coverage
• Globally visible specialized indices
• 157 year history
TMX Group Serves Companies at all Stages of Growth
Market Capitalization
Toronto Stock Exchange and TSX Venture Exchange
Unique feeder system
As at June 30, 2010
93%
% of TSX Issuers
471
graduates
% of TSXV Issuers
35%
514
2016
Issuers Issuers
<$50 Million
476
Issuers
+ 85 M&A*
33%
32%
7%
498
142
Issuers
$50 - $250 Million
1%
19
Issuers
>$250 Million
*From January 1, 2000 – June 30, 2010
Toronto Stock Exchange issuer base: 1,488 issuers, ~$1.8 trillion market cap
TSX Venture Exchange issuer base (excludes NEX): 2,177 issuers, ~$37.7 billion market cap
11 11
TMX Group’s Equity Exchanges Support a Diverse Issuer Base
Number of Issuers by Sector
Includes issuers on Toronto Stock Exchange and TSX Venture Exchange (100% = 3665)
12 As at June 30 2010
Why Companies Consider TSX and TSX Venture Exchange
Unique Public
Market for small to
mid cap companies
13
•
Access to Capital
•
Liquidity
•
Visibility
Benefits of Going Public
Access capital and
Facilitate
future financing
growth
opportunities
14
Increase visibility
Provide liquidity
and prestige
for shareholders
Create employee
incentive
mechanism
Access to Capital: 2009 was an all time record year
for financing on TSX
Toronto Stock Exchange and TSX Venture Exchange
Total Financings (C$Billions) 1999 – 2010 June
64.9
60.0
52.2
46.2
58.8
49.7
47.6
41.8
19.2
25.5
23.1
19.2
27.3
22.0
25.8
31.5
32.5
29.1
28.4
35.3
25.5
21.9
20.9
2.4
1.1
1.4
2.4
4.1
7.9
2000
2001
2002
2003
2004
*TSX Venture Exchange commenced operations on November 29 1999
11.1
5.5
4.8
1.3
2005
Toronto Stock Exchange
15
26.9
25.6
6.1
1999*
40.8
2006
2007
TSX Venture Exchange
2008
2009
3.7
2009 YTD 2010 YTD
June
June
Trends: TSXV Financings by Type
12,000
$9,754
10,000
C$ MM
8,000
$7,060
$5,608
6,000
$4,667
$3,817
$3,686
4,000
$2,678
$2,124
2,000
$257 $197
$370
$120 $132
$194 $270
$937
$855
$873
$446
$609
$533
$225
$122
$90
0
2003
2004
2005
2006
IPO
16
2007
PP
PO
2008
2009
2010
YTD
June
TSX and TSX Venture Exchange have shown consistent
growth in liquidity
TSX Venture Exchange
Toronto Stock Exchange
Volume of Shares Traded
Volume of Shares Traded
Billions of Shares
Billions of Shares
52.6
43.6
109.2
46.2
96.1
37.1
82.0
29.8
21.1
2005
17
118.5
64.2
63.0
51.1
18.9
2006
2007
2008
2009
2009
2010
YTD
June
2005
2006
2007
2008
2009
2009
2010
YTD
YTD
YTD
June
June
June
A TMX Group Listing can Provide Analyst Visibility
872
4
259
TSX Companies get
Analyst Coverage
Average Number of
Analysts Covering
TSX Cos.
TSXV Companies get
Analyst Coverage
Source: Capital IQ, December 31 2009
18
Methods for Going Public on Toronto Stock
Exchange or TSX Venture Exchange
19
Trends: New TSXV Listings by Type
366
259
329
281
202
2005
2006
2007
IPO
20
CPC IPO
2008
QT
RTO
2009
Other
155
2010 YTD June
Capital Pool Company™ (CPC) Program has a Strong
Track Record
Since inception:
•Over 2050 CPCs were created
•80% have completed their QT – over
1600 companies
•329 Graduates now trade on TSX
•96 of the grads were CPCs
21
Advantages of Listing on TSX and TSX Venture
•
Canada is the market of choice for resource and SME companies
• Top global player in energy and resource listings and financings
• Diverse cross-section of listed companies in a variety of sectors
•
Standards-based exchanges that promote integrity for public SMEs
• Access to specialized products for TSX/TSXV listing (eg. Capital Pool Company Program)
•
Sustained access to capital – steady growth of capital investment over past 5 years
•
Strong equity culture – 50% of Canadians hold equities
•
Strong trading liquidity – value traded has more than doubled over the past 5 years
•
Lower trading impact costs on TSX
•
Analyst coverage typically seen at an earlier stage
•
Access to US capital without the higher cost of regulatory compliance
•
Ease of access to US market with Multijurisdictional program
•
Canadian regulatory commissions and exchanges are customer-focused
•
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
•
TSX provides listed companies unparalleled product and service support
22
Key Considerations
•
The ‘Team’
• Internal – management and board of directors
• External – advisors (financial, legal, accounting, investor relations)
•
Business Plan
• Clarity of goals / milestones
• Realistic and attainable
•
Financial Plan
• Budget for costs of being public
• How much $ to raise, and why?
•
Understand the drawbacks
• Disclosure, transparency and public scrutiny
• Costs
• Management time commitment away from core business.
•
The ‘Story’ – growth potential and attracting investors
•
Commitment to ‘Act Public’ early
•
Timing – long term decision
23
Supporting Your Growth
Our comprehensive portfolio of additional products and services
IR Services
Equicom Group: Canada’s leading IR consulting firm
and strategic communication experts
Thomson ONE Investor Relations: Advanced market
data, First Call research, Ownership and Contacts,
iTarget
Visibility/ Outreach Services
TMX/Equicom “On the Radar”: Issuer showcases
TMX Group Annual General Meeting Services
TMX Group Annual Report Services
CNW: Canada’s premiere newswire service provider
S&P/TMX Market Access Program & Stock Reports:
Increases US visibility
Investor Scorecards
Research Services/
Educational /Support Services
Perception Audit: Investor Studies
Webinars / Webcasts / Research Papers
Capital Market Intelligence
Market intelligence, IR analytics
TSX Venture Mentorship Program
Thomson Reuters Corporate Advisory Services – stock
surveillance
TSX Workshop Series
Historical data
Exchange Filing Services
Shareholder reporting
24
Companies can capitalize on TMX Leadership
25
Case Study
Immunovaccine Inc.
Keith Abriel, CFO
26
Basics of Going Public Panel
Allan L. Jenkins,
PWC
Glenn Jessome,
Jessome Law
Scott Urquhart,
Jennings Capital
Kevin G. Redden,
NSSC
27
Capital Pool Company™
An alternative source of growth capital
28
Capital Pool Company Panel
Richard Gordon,
President, Oceanus Resources Corporation
James D. Nicoll
Vice-President, PWC
29
Going Public Transactions
TMX Equity markets embrace multiple mechanisms for “go-public” transactions
30
Capital Pool Company™ (CPC) Program has a Strong
Track Record
Since inception:
•Over 2050 CPCs were created
•80% have completed their QT – over
1600 companies
•329 Graduates now trade on TSX
•96 of the grads were CPCs
31
Capital Pool Company: Process
24 Months Maximum
Seed
Public Financing and
CPC Trades
32
CPC Acquires
Business (QT)
Aftermarket and
Growth
Capital Pool Company: Milestones


Seed Financing
–
Minimum of $100,000 seed financing of the company by 3-5
Founders/Directors
–
Up to $500,000 can be discount seed
CPC IPO
–

Qualifying Transaction (QT)
–

a target business is identified, disclosed and acquired
Aftermarket and Growth
–
33
a prospectus offering to create a corporate vehicle with public
distribution (maximum that can be raised $5,000,000).
company trades and executes its business plan
1. Seed Financing
Seed
34
•
•
•
3-5 CPC Founders:
Collectively invest $100,000 or more in seed funding
Up to $500,000 can be discount seed
•
•
•
Appoint CPC Board of Directors
Seed investors do not have to be Directors
$5,000 minimum investment / Director
Consider this…
• Success Factors:
• Cohesive team with same level of
commitment
• Reasonable timeline & budget
agreement
• Strategic & institutional capital
• Board: dealflow network, business
contacts, business and pubco experience
• Develop relationship with TSXV
35
• Potential Pitfalls:
• Observe structuring rules regarding
$5,000 minimum per Director and
$100,000 Director group minimum
2. CPC Initial Public Offering
•
•
Seed
36
Public Financing
and CPC Trades
CPC IPO is completed:
• President’s list
• Broker’s list
• Stock options
Agent(s) compensation
Consider this…
• Success Factors:
• Potential Pitfalls:
• Broker commitment
• Double check “agreement in principle”
not yet established
• Selecting the right team of advisors with
CPC experience
• TargetCo, CPC and Sponsor must all
have representation
37
• PIFs - timing and impact on prospectus
3. Qualifying Transaction
24 Months Maximum
Seed
Public Financing
and CPC Trades
38
CPC Acquires
Business (QT)
Selecting a QT Candidate
39
•
Considerations for a Qualifying Transaction:
•
Significant growth opportunity & reason to be public
•
Strong & coachable management
•
Capital needs: $1 M to $20 M
•
Close to commercialization
•
Meets minimum listing and audit requirements
•
Stock options and acquisition currency
•
Strong market appetite
•
12 to 18 month cash requirements (can be financed)
Anatomy of a Qualifying Transaction
CPC
Seed (Founder) =
10 M shares @ $0.05
IPO =
5 M shares @ $0.10
Private Company/
Asset purchase
250 000 shares @ $0.27
Qualifying Transaction
New Financing = $ 0.5 M
New TSX Venture Company
40
Resulting Share Structure
Shares
Seed Investors*
CPC IPO*
Acquisition of QT
Financing
Totals
Price
Invested/
Valuation
Market @
$0.25
10,000,000
$0.05
$500,000
$2.5 M
59%
5,000,000
$0.10
$500,000
$1.25 M
30%
250,000
$0.27
$225,000
$0.2 M
1%
1,666,665
$0.30
$500,000
$0.42 M
10%
$4.23 M
100%
16,916,665
*CPCs shares were not consolidated on the QT which often happens.
Closing price the first day of trading post QT: $0.25. Since then traded in the $0.20 - $0.35 range
41
Ownership
ROI for Founder
Seed Investment:
$500,000 invested at $0.05 = 10,000,000 shares
Post QT:
10,000,000 shares @ $0.25 = $2,500,000
ROI:
400%
42
Consider this…
• Success Factors:
• Potential Pitfalls:
• Lots of cash on closing
• Listing requirements shortfalls
• Market interest and understanding
• Insufficient cash/working capital on
closing
• Deliver in short term post closing
• Reasonable valuation – not always
maximum valuation
• Valuation versus escrow regime (TSXV
Policy 5.4)
• PIFs - timing and impact on circular
43
4. Aftermarket and Growth
24 Months Maximum
Seed
Public Financing
and CPC Trades
44
CPC Acquires
Business (QT)
Aftermarket
and Growth
Aftermarket
• TargetCo post QT Investor relations program
–
Shortlist IR firms early on
• Consider CPC board members with capital market experience
• Execute business plan
• Private placements
• Acquisitions
• Governance/compliance with securities laws and Exchange policies
45
Consider this…
• Success Factors:
• Potential Pitfalls:
• Press release clarity/ quality
• Orphan status
• Broker management and support
• Mistrust of management’s
willingness to communicate
• Timely disclosure against published
milestones (good and bad)
46
• Market fluctuations
Why/When a CPC
47
Company
Wants/
Needs
•
•
•
•
Alternative access to capital; Retain higher ownership
Want to be public company (M&A currency, stock options, visibility)
Greater flexibility, certainty and control in the process
Going public risk reduced
Market
Conditions
•
•
•
•
Company is too early stage for a broadly distributed regular IPO
IPO market is not strong enough in general
VC financing is not viable or management prefers not to use
Market appears to reward growth business of target company’s
sector
Critical
Success
Factors
•
•
•
•
•
Management
Long term strategy to grow as a public company
Reasonable valuation = Viable share structure
Investor support
Appropriate advisors (lawyer, broker, investment banker)
2009 QTs
99 Capital Corporation
Acro Energy Technologies
AgriMarine Holdings Inc
Alston Ventures Inc
Ansell Capital Corp
Antler Creek Energy Corp
Argex Silver Capital Inc
Armadillo Resources Ltd
Ashburton Ventures Inc
Astorius Resources Ltd
Bassett Media Group Corp
Blackbird Investments Inc
Blackline GPS Corp
Canada Fluorspar Inc
Carbon2Green Corporation
Caribou Copper Resources Ltd
Cascade Resources Ltd
Ceres Capital Corp
Challenger Deep Capital Corp
Changyu Medtech Ltd
Cobalt Coal Corp
Coltstar Ventures Inc
Corbal Capital Corp
Crown Minerals Inc
CRS Electronics Inc
Dee Three Exploration Inc
Defiance Capital Corp
Edgewater Exploration Ltd
Ethos Capital Corp
48
ForceLogix Technologies Inc
Foundation Resources Inc.
GFE Capital Corp
Global Key Investment Limited
Greenangel Energy Corp
Hamilton Thorne Ltd
Heatherdale Resources Ltd
Hermes Financial Inc
Immunovaccine Inc
Innovative Composites International Inc
ISG Capital Corporation
Jiminex Inc
Jiulian Resources Inc
Kilo Goldmines Ltd
Knick Exploration Inc
Landen Capital Corp
Lincoln Mining Corporation
Liuyang Fireworks Limited
Mega View Digital Entertainment Corp
Morumbi Oil & Gas Inc
Mosam Capital Corp.
Natcore Technology Inc
Northern Spirit Resources Inc
NV Gold Corporation
Paget Minerals Corp
Parallel Capital Corp.
Parta Sustainable Solutions Inc
PetroKamchatka Plc
Podium Capital Corporation
Providence Capital Corp
Rockridge Capital Corp
Rugby Mining Limited
Sandspring Resources Ltd
Scorpio Gold Corporation
Sila Industrial Group Ltd
Sino Vanadium Inc
Sirona Biochem Corp
Spot Coffee (Canada) Ltd
TAD Capital Corp
Taipan Resources Inc
Tasman Metals Ltd
Theia Resources Ltd
Toptent Inc
Tosca Mining Corp
Touchdown Capital Inc.
TrueContext Mobile Solutions Corporation
Unity Energy Corp
Urastar Energy Inc
Venture One Capital Corp
Waterloo Resources Ltd
Westcore Energy Ltd
World Famous Pizza Company Ltd
xRM Global Inc
Thank you to our partners
49
Louis Doyle
Vice President, Listed Issuer Services
TSX Venture Exchange
T: 514-788-2407
louis.doyle@tsx.com
Disclaimer
This document is for information purposes only and is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange.
TMX Group Inc. and its affiliates do not endorse or recommend any securities referenced in this document. Please seek professional advice to evaluate specific securities.
While the information herein is collected and compiled with care, neither TMX Group Inc. nor any of its affiliated companies represents, warrants or guarantees the accuracy or the
completeness of the information. You agree not to rely on the information contained herein for any trading, business or financial purpose.
This information is provided with the express condition, to which by making use thereof you expressly consent, that no liability shall be incurred by TMX Group Inc. and/or any of its
affiliates
as a result of any errors or inaccuracies herein or any use or reliance upon this information.
50
© 2010 TMX Group Inc.