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MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock
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MaRS Best Practices: Valuations in the cleantech Industry - Tim Babcock

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Tim Babcock (TSXV) discusses investor interest and valuations in the cleantech industry at MaRS on Nov. 19 as part of MaRS Best Practices Special Valuations Series in partnership with the TSX. Event …

Tim Babcock (TSXV) discusses investor interest and valuations in the cleantech industry at MaRS on Nov. 19 as part of MaRS Best Practices Special Valuations Series in partnership with the TSX. Event information at http://www.marsdd.com/events/details.html?uuid=f2771438-817d-4554-aaa2-ef5f12edf6c6

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  • 1. MaRS Best Practices Series Special Valuation Series Nov. 12th, 2010 MaRS Best Practices Special Valuation Series Friday Nov 19th 12:00-1:30pm Tim Babcock Director, Listed Issuer Services TSX Venture Exchange Rupert Merer Energy Technology Research Analyst National Bank Financial (NBF) Speakers: More information and registration at www.marsdd.com/bestpractices
  • 2. MaRS Tim Babcock, Director, Listed Issuer Services TSX Venture Exchange November 19, 2010 A Capital Opportunity for Clean Technology Companies Listing on Toronto Stock Exchange and TSX Venture Exchange
  • 3. 3 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.
  • 4. 4 1.  TSX and TSXV – The 3 Minute Overview 2.  The Clean Technology Sector 3.  Structure Tools for Entrepreneurial Finance 4.  Case Studies Outline
  • 5. 5 (53.8% Ownership) (47% Ownership) (19.9% Ownership) Data  Energy  Deriva-ves  Fixed Income  Equi-es  •  Canada’s financial system has been ranked as the soundest in the world for two years in a row by the World Economic Forum •  Lowest debt-to-GDP among G7 •  Relatively strong financial position: – 12 years of surpluses 1998-2009 •  Significant resource base Strong fundamentals in Canada TMX Group is a Multi-Asset Class Market Leader (51% Ownership)
  • 6. 6 General Conditions YTD September 2010: Key Markets TSX/TSXV LSE/AIM NYSE/AMEX Euronext (US) Nasdaq ASX Hong Kong Exchanges Number of Issuers Listed 3,628 2,978 2,314 2,805 1,966 1,365 Quoted Market Value (US$ Billions) 1,867.6 3,467.6  12,278.4 3,480.7 1,318.6 2,536.0 New Listings 370 113 78 157 69 58 Equity Capital Raised (US$ Billions) 32.6 41.1 66.9 4.7* 25.4 42.8 Value Traded (US$ Billions) 993.2 2,123.3 13,794.6 9,998.0 786.1 1,027.6 Broad Stock Market Indexes (%Change over Sept 30 2009) 8.5% 8.9% 5.4% 11.6% -2.2% 7.0% *NASDAQ Information does not include secondary financings Source: Exchange Websites, World Federation of Exchanges, (TMX analysis of public information)
  • 7. 7 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% = 3628) As at September 30 2010
  • 8. 8 Access to Capital: 2009 was an all time record year for financing on TSX *TSX Venture Exchange commenced operations on November 29 1999 Toronto Stock Exchange and TSX Venture Exchange Total Financings (C$Billions) 1999 – 2010 September
  • 9. 9 2,143 companies 27 graduates in YTD Sept 2010 20 graduates in 2009 45 graduates in 2008 1,485 companies TSX Venture Exchange •  Access to capital for earlier stage companies or smaller financings •  Total market cap of $48.5 Billion & average market cap of $22.6MM •  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 Toronto Stock Exchange •  Senior market for well established businesses and management teams with experience in public markets •  Total market cap of $1.9 Trillion & average market cap of $1.3B •  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 Unique Equity Market Structure
  • 10. 10 TMX Group Serves Companies at all Stages of Growth Market Capitalization Toronto Stock Exchange and TSX Venture Exchange Unique feeder system 478 graduates + 93 M&A* *From January 1, 2000 – September 30, 2010 10 Toronto Stock Exchange issuer base: 1,485 issuers, ~$1.9 trillion market cap TSX Venture Exchange issuer base (excludes NEX): 2,143 issuers, ~$48.5 billion market cap As at September 30, 2010 473 Issuers 549 Issuers 463 Issuers 1922 Issuers 191 30 Issuers
  • 11. 11 TMX Group Global Leadership Strengths All data is as of or YTD September 30, 2010 1480 issuers 55% of the world’s public mining companies 140 going public events $9.8 B equity raised $305 B value traded 128 issuers Number one in the world by number of public clean technology companies 8 going public events $1.1 B equity raised $7.6 B value traded 3628 issuers 370 going public events $33.7 B equity raised Average Financing: TSX $51.9 M TSXV $3.5 M 468 issuers Over 35% of the world’s public oil and gas companies 44 going public events $8.2 B equity raised $204 B value traded Mining Energy & Energy Services Clean Technology
  • 12. 12 1.  TSX and TSXV – The 3 Minute Overview 2.  The Clean Technology Sector 3.  Structure Tools for Entrepreneurial Finance 4.  Case Studies Outline
  • 13. 13 Clean Technology Market on TSX and TSXV 128 Companies 30% of TSX Issuers in the Sector Graduated TSXV $17B Total Market Cap $1.1B Equity Capital Raised As at and YTD Sept 30 2010 8 New Listings
  • 14. 14 Clean Technology Financing by Subsector As at and YTD Sept 30 2010 Of the $1B+ in equity capital raised year to date this is how the funds have broken down by  subsector on TSX ($943M) and TSXV ($152M)  
  • 15. 15 Strong Growth in Key Market Metrics Analyst Coverage Avg. Analyst Coverage for Clean Technology  Companies by Market Cap  Strong analyst coverage combined with growth in trading and liquidity provides posiMve  market fundamentals for Clean Technology companies to finance and grow.   Market Capitalization (C$ Millions) 150-500 >100050-150<50 500-1000 Source: Capital IQ, June 2010 Volume of Shares Traded Millions of Shares Traded in the Clean Technology Sector  2005 20092007 20082006
  • 16. 16 TSX Venture 50® - Clean Technology Top 10 TOP 10 CLEAN TECHNOLOGY COMPANIES 341% One-year Average Market Cap Growth 236% Average ROI in 2009 542 Million Volume of Shares Traded in 2009 2 Average number of analysts covering the Top 10 TSX Venture 50® is a ranking of strong performers on TSX Venture Exchange. These emerging companies have seen tremendous growth over the past year, offered remarkable return to their shareholders, are actively traded in the market and are well-covered by the analyst community. In short, they have proven themselves to be the rising stars of Canada's public markets.
  • 17. 17 CONSTITUENTS Algonquin Power & Utilities Corp. (AQN) ATS Automation Tooling Systems Inc. (ATA) Azure Dynamics Corporation (AZD) Ballard Power Systems Inc. (BLD) Boralex Inc. (BLX) Boralex Power Income Fund (BPT.UN) Brookfield Renewable Power Fund (BRC.UN) Burcon NutraScience Corporation (BU) Cascades Inc. (CAS) Capital Power Income LP (CPA.UN) 5N Plus Inc. (VNP) Westport Innovations Inc. (WPT) S&P/TSX Clean Technology Index Launched in March 2010 The S&P/TSX Clean Technology Index Measures the performance of companies listed on TSX that generate upwards of 50% of their revenue from products or services focused on reducing or eliminating negative ecological impacts, while at the same time improving the productive and responsible use of natural resources. GLV Inc. (GLV.A) Innergex Renewable Energy Inc. (INE) Macquarie Power & Infrastructure Income Fund (MPT.UN) Magma Energy Corp (MXY) Newalta Corporation (NAL) Northland Power Income Fund (NPI.UN) Plutonic Power Corporation (PCC) Ram Power Corp. (RPG) RuggedCom Inc. (RCM) Tembec Inc. (TMB) WaterFurnace Renewable Energy Inc. (WFI)
  • 18. 18 1.  TSX and TSXV – The 3 Minute Overview 2.  The Clean Technology Sector 3.  Structure Tools for Entrepreneurial Finance 4.  Case Studies Outline
  • 19. 19 Benefits of Going Public Access capital and future financing opportunities Facilitate growth Increase visibility and prestige Provide liquidity for shareholders Create employee incentive mechanism
  • 20. 20 Methods for Going Public on Toronto Stock Exchange or TSX Venture Exchange
  • 21. 21 Capital Pool Company™ (CPC) Program has a Strong Track Record Since inception: • Over 2095 CPCs were created • 80% have completed their QT – over 1660 companies • 332 TSXV Graduates now trade on TSX • 96 of the grads were CPCs • 7 of 9 new Clean Technology listings in 2009 were QTs • A new clean CPC shell has none of the hidden costs of a shell with previous operating history
  • 22. 22 Benefits of the CPC Program for Small Companies 1.  Cash on the Balance Sheet; 2.  Potential to identify Directors and Long-term Investors; 3.  At least 200 Public Shareholders to create liquidity; 4.  Listing Process can be faster and less costly.
  • 23. 23 CPC Acquires Business (QT) Public Financing and CPC Trades Seed 24 Months Maximum Capital Pool Company: Process Aftermarket and Growth
  • 24. 24 24 Seed Financing •  seed financing of the company by 3-5 Founders/Directors CPC IPO •  a prospectus offering to create a corporate vehicle with public distribution Qualifying Transaction (QT) •  a target business is identified, disclosed and acquired Aftermarket and Growth •  company trades and executes its business plan Capital Pool Company: Milestones
  • 25. 25 25 CPC Acquires Business (QT) Public Financing and CPC TradesSeed 24 Months Maximum Qualifying Transaction
  • 26. 26 26 Considerations for a Qualifying Transaction: •  Significant growth opportunity & reason to be public •  Strong & coachable management •  Capital needs: $2+ Million •  Close to or at commercialization •  Meets minimum listing and audit requirements •  Stock options and acquisition currency •  Strong market appetite •  12 to 18 month cash requirements (can be financed) Selecting a QT Candidate
  • 27. 27 27 Consider this… Success Factors: •  Lots of cash on closing •  Market interest and understanding •  Deliver in short term post closing •  Reasonable valuation – not always maximum valuation Potential Pitfalls: •  Listing requirements shortfalls •  Insufficient cash/working capital on closing •  Valuation versus escrow regime (TSXV Policy 5.4) •  PIFs - timing and impact on circular
  • 28. 28 28 CPC Acquires Business (QT) Public Financing and CPC TradesSeed 24 Months Maximum Aftermarket and Growth Aftermarket and Growth
  • 29. 29 29 Consider this… Success Factors: •  Press release clarity / quality •  Broker management and support •  Timely disclosure against published milestones (good and bad) Potential Pitfalls: •  Orphan status •  Mistrust of management’s willingness to communicate •  Market fluctuations
  • 30. 30 Toronto Stock Exchange and TSX Venture Exchange listing fees are competitive Min and Max Initial Fees (C$000s) *There is no maximum fee. Market cap of $1B was used for illustration purposes **NYSE has a USD $500,000 cap on listing fees per issuer, per year ***Does not include NOMAD fees NB: For international companies, TSX initial listing fees max out at $150K Source: TSX analysis of exchange listing fee documents. As at August 25, 2010 79 42 Min and Max Sustaining Fees (C$000s)
  • 31. 31 TSX and TSX Venture Exchange Estimated Listing Costs Toronto Stock Exchange TSX Venture Exchange Listing Fees $10,000 - $200,000 $7,500 - $40,000 Accounting and Auditing Fees $75,000 - $100,000 $25,000 - $100,000 Legal Fees $400,000 - $750,000 $75,000+ Underwriter’ commission 4 – 6% Up to 12% Other fees to consider include: •  Securities Commissions fee •  Transfer agency fees •  Investor relations costs •  Geological or engineering reports •  Printing and translation costs •  Valuation reports •  Director and Officer liability insurance
  • 32. 32 1.  TSX and TSXV – The 3 Minute Overview 2.  The Clean Technology Sector 3.  Structure Tools for Entrepreneurial Finance 4.  Case Studies Outline
  • 33. 33 BioExx Specialty Proteins Ltd. Technology company focused on the extraction of oil and high-value proteins from oilseeds for the global food market. #1 Ranked Clean Technology Company and “Pick of the Street” - 2010 Venture 50TM Date of Listing Graduated from TSX Venture Exchange to Toronto Stock Exchange on January 22, 2010 Market Capitalization $273.1 million as of June 30, 2010 Analyst Coverage 7 Canadian Analysts / 1 US Analyst (Source: CapitalIQ) Financing, Price & Trading Volume History (Sept’06 – June’10) *(Source: Capital IQ) BXI 
  • 34. 34 Catch the Wind Based in Manassas, Virginia, Catch the Wind develops, manufactures, and sells laser based wind sensor systems for the wind power generation industry in the United States. One of the Top 10 Clean Technology companies – 2010 Venture 50TM Date of Listing Listed on TSX Venture Exchange through the CPC Program on April 3, 2007 Completed Qualifying Transaction on September 23, 2008 Financings $5.2 million by Private Placement in April 2010 $21.8 million by Private Placement in May 2009 $15.7 million raised at time of Qualifying Transaction in September 2008 Market Capitalization $86.3 Million as of June 30, 2010 based on 57.5 million shares outstanding Analyst Coverage 4 Canadian Analysts (Source: Capital IQ) Price and Trading Volume (Sept’08 – June’10) *(Source: Capital IQ) CTW 
  • 35. 35 China Annie Tao 416 947-4273 annie.tao@tmx.com Diversified Industries Raymond King 416 947-4675 raymond.king@tmx.com United States Tala Zarbafi 416 947-4636 tala.zarbafi@tmx.com Energy Cindy Gray 403 218-2822 cindy.gray@tmx.com Mining Greg Ferron 416 947-4477 greg.ferron@tmx.com Clean Technology Robert Peterman 416 947-4305 robert.peterman@tmx.com

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