Another of the common reasons we hear is that going public is an ‘exit strategy’, when the early stage investors and even the founders finally achieve a market-bestowed multiple on the value of their ownership and acquire the option to sell some of their own shares and reap some financial rewards for their years of risk and hard work.

Without doubt one of the best reasons to take a company public is to attain access to the investment dollars that can be raised in the capital markets. Canada has robust capital markets that offer sources of investment funds that are generally not available to private enterprises. Access to these sources can allow you to propel your company to ‘the next level’ by enabling you to do the things you need to do to make that happen.

Those are all excellent reasons to go public, and there are no doubt more. But is there a RIGHT time to go public?

Many entrepreneurs are worried that going public too early means giving up a lot of equity in their company before the real value proposition is achieved. Their concern is giving up too much too soon and diluting their ownership at the wrong time.

But the other side of that coin is: “If I can’t access capital to make my enterprise what it should be then I may never get to the ‘Promised Land’ at all!” In other words, it might be better to get additional capitalization now, and build the business successfully, than to never get to the next level at all – even if it means diluting your ownership more than you would like. The old adage that 20 percent of something is a lot better than 100 percent of nothing is one that many business owners would do well to consider. Entrepreneurs should bear in mind that not all equity deals need involve taking a large haircut – it will depend on the stage of development of the business and the capital needed and the current appetites of equity investors.

Of course, these are issues that are not easy to resolve. There will likely be personal considerations that speak to a sense of ownership and what the business means to the particular individual. Many people cannot get past the quasi-parental relationship they have with their business, tending to look at the enterprise as their ’baby’ or child.

The real question perhaps is not “when is the right time to go public”, but “when is the right time for ME?”

The Canadian National Stock Exchange welcomes and assists vibrant young companies with the whole process of accessing the public capital markets. Give one of us a call at the numbers below if you would like to discuss some options for your company.

Find out where you currently stand in the process of going public through our Going Public Interactive Questionnaire:

FIND OUT IF YOU’RE READY TO GO PUBLIC

Peter Traynor
416-572-2000 x 2349
peter.traynor@cnsx.ca
 

or

Jeffrey Stanger
647-500-0492
jeffrey@itbsolutions.ca
 

Services include:

• Assisting in the preparation of appropriate materials to present to registered Investment Dealers to increase your success rate in acquiring a sponsor.
• Using our networks and relationships to develop relationships between your company and the investment dealers who have the experience and ability to complete the financing.
• Providing company management with guidance on how to present their company and investment opportunity, avoiding many pitfalls that companies face in obtaining an investment dealer as a sponsor.
• Arranging and attending meetings with management and investment dealers to assist in getting the most effective agreement with the proper investment dealer.
• Recommending the appropriate legal and audit professionals.
• Discussing and providing feedback on the structure of the company prior to submission of the prospectus for listing.
• Coordinating filings and documents with the Exchange and the legal and audit professionals.
• Preparation and completion of exchange listing documents.
• Development of relationships with market makers.
• Creation of Investor Relations programs including sourcing the appropriate professionals.
• Sourcing of appropriate directors with public company experience.

In Canada, unlike the US, there are no Over-the Counter (“OTC”) Markets, therefore all RTO’s are reviewed by the regulation department of a stock exchange, which provides a level of comfort for the company going public as well as for the shareholders of the “shell” company.

Great care must be taken in sourcing out shell companies for this purpose. They must be legally in good standing, with no overhanging lawsuits pending, and must be up to date with their required filings to the regulatory authorities.

ITB Solutions can help you with the RTO process.
 

Services include:

• Sourcing clean shells according to the client’s requirements.
• Establishing a short list of ideal shells to approach.
• Calling the short list of shells on a no-name basis and discussing the opportunity to them.
• Arranging meetings and assisting with negotiations.
• Procuring a Letter of Intent.
• Coordinating filings and documents with the Exchange as well as with the legal and audit professionals.
• Preparation and completion of Exchange listing documents.
• Development of relationships with market makers.
• Creation of Investor Relations programs including sourcing the appropriate professionals.
• Sourcing of appropriate directors with public company experience for board appointment.

ITB Solutions can assist in this process by advising management as to the company’s readiness for this route, or what they might do in order to be prepared for it. ITB Solutions will also provide a clear path to a cost-effective and efficient non-offering prospectus public listing.
 

Services include:

• Sourcing the appropriate legal and audit professionals.
• Discussing and providing feedback on the structure of the company prior to submission of the prospectus for listing.
• Coordinating filings and documents with the Exchange, as well as the legal and audit professionals.
• Preparation and completion of Exchange listing documents.
• Development of relationships with market makers.
• Creation of Investor Relations programs including sourcing the appropriate professionals.
• Sourcing of appropriate directors with public company experience.

Our network of investment professionals include:

• Investment Banking Departments
• Corporate Finance Departments
• Investment Advisors who finance companies
• Institutional Fund Managers
• Merchant Banks
• Private Equity Firms
• High Net Worth Investment Networks

ITB Solutions can provide private companies with a pre-public/financing research report completed by Chartered Financial Analysts (CFAs).  This report provides a fair overview of the company and its market so that a balanced assessment can be made by investment professionals.
 

ITB Solutions provides a clear path for Chinese Companies to access capital and to achieve a public listing in Canada. Our team of financial professionals are well experienced in North American public listings of Chinese companies.

In depth due diligence is a vital component of this process, maximizing a smooth road to listing and to date, ITB Solutions has worked with and has listed Chinese companies with a variety of structures, from common equity, up to and including VIE (Variable Interest Entity) Structures. We encourage you to contact us regarding your China based venture and permit us to discuss the options with you.
 

The primary international centers of Islamic Finance in non-Islamic countries are currently London, the United Kingdom, and Luxembourg.

For several reasons, Canada is well positioned to become the Islamic Finance Hub of North America.

A Sukuk is a financial product that is certified as Sharia compliant. Traditional fixed-income, interest bearing bonds are not allowed under Sharia Law, however Sukuk are securities that comply with Islamic law and its investment values and do not permit the charging of interest.

ITB has developed relationships and the professional expertise to provide capital to companies through Sukuk structures. The fact is, a great many North American companies are eligible to benefit from an Islamic financing, and the market is destined to continue to grow strongly in this area.
 

Pre-Public/Financing Research Report
ITB Solutions can provide private companies with a pre-public/financing research report completed by Chartered Financial Analysts (CFAs). This report provides a fair overview of the company and its market so that a balanced assessment can be made by investment professionals.
 

For companies in Canada that are considering the transition from private to publicly traded status in the near or medium term future, it is important to think about your audit requirements – not only going forward, but right now.

What is a CPAB Registered Auditor?
The Canadian Public Accountability Board (“CPAB”) was incorporated in 2003 under the Canada Corporation Act. Its mission is:

To contribute to public confidence in the integrity of financial reporting of reporting issuers in Canada by effective regulation and promoting quality, independent auditing.

CPAB is a regulating body in Canada which has oversight responsibility for its participating audit firms. CPAB registration is a requirement for audit firms whose clients include public companies in Canada – otherwise known as “reporting issuers”.

Regular inspections by CPAB officials are conducted on the participating firms. Those audit firms with 100 or more public company clients are inspected annually. Those with more than 50 are inspected at least once every two years, and those firms with fewer than 50 reporting issuers for clients receive inspections from CPAB every three years.

In order to be a publicly traded company in Canada you need to have a CPAB registered audit firm engaged to conduct your company’s annual audits and any other required assurance work in connection with being a reporting issuer.

When should I engage a CPAB auditor?

It’s a good question, and hopefully you are asking it before you are actually public.

Three years of historical audited financial statements are typically required by securities commissions of a company that is going public. While these audits need not be performed by a CPAB auditor, the next required audit (following a public listing) will only be acceptable if it is performed by a registered firm. Private companies seeking access to the public capital markets are routinely advised to engage a CPAB auditor to avoid the time and expense of switching once they are public. Often times you may be faced with having to file documents that require the consent of the auditors for a period of years. It is generally cheaper and simpler to have a minimum number of auditors involved in your future filings.

As well, the markets generally do not like to see changes in audit firms so arranging for your CPAB registered auditor early can be a desirable action. CPAB registered auditors tend to be very knowledgeable about the requirements of the various securities commissions and stock exchanges since they deal with them quite regularly. This generally provides for a smooth process with your listing application, IPO or RTO documents.

What is PCAOB?

If your plans include a US Listing then you should likely consider engaging a firm that is also similarly recognized in the United States by the Public Company Accounting Oversight Board (“PCAOB”).

Serving a very similar function to Canada’s CPAB, the PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. The PCAOB also oversees the audits of broker-dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection.

While many private companies very typically employ non-CPAB/PCAOB auditors, those companies with the longer view and foresight to see that they may well one day wish to access the public capital markets and become publicly traded in Canada, and/or potentially the United States, do well to hire auditors with the requisite registration – on both sides of the border – well ahead of time.

Having a CPAB and PCAOB auditing team in place well ahead of time can make sound business sense, and save your company a lot of time, expense, and shareholder concern at a critical time for the Company’s public confidence.

The Take Away

In short, if you own or are managing a private company that is currently harboring the intention of accessing the Canadian capital markets and becoming publicly traded in Canada, one of the best steps you can take is to source out a CPAB and sometimes a PCAOB registered audit firm. The best ones will not only take care of your corporate regulatory compliance and financial accounting requirements, but will provide invaluable advice to you on an ongoing basis regarding your compliance needs as well as your mandated corporate governance requirements.