Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Technology Initial Public Offerings - Legal and Practical Considerations for Issuers Listing on the TSX


Published on

Technology IPOs on the TSX

We've translated our IPO guide into Slideshare, to make it easier to review the slides and incorporate them into your own decks. This deck covers:

- advantages and disadvantages of going public
- IPO readiness - step to prepare in the 12 months before an IPO
- which market: TSX or NASDAQ?
- IPO process
- special issues for U.S. companies going public on the TSX

Published in: Business
  • Hello! I do no use writing service very often, only when I really have problems. But this one, I like best of all. The team of writers operates very quickly. It's called ⇒ ⇐ Hope this helps!
    Are you sure you want to  Yes  No
    Your message goes here
  • The last one problem with writing is the most actual) If to speak sinceresly writing is not an easy task especially if you have no certain writing skills. That's why our company helps students to write any type of scientific papers!
    Are you sure you want to  Yes  No
    Your message goes here
  • Sex in your area is here: ❤❤❤ ❤❤❤
    Are you sure you want to  Yes  No
    Your message goes here
  • Dating direct: ♥♥♥ ♥♥♥
    Are you sure you want to  Yes  No
    Your message goes here
  • DOWNLOAD FULL. BOOKS INTO AVAILABLE FORMAT ......................................................................................................................... ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { } ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { } ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .............. Browse by Genre Available eBooks ......................................................................................................................... Art, Biography, Business, Chick Lit, Children's, Christian, Classics, Comics, Contemporary, Cookbooks, Crime, Ebooks, Fantasy, Fiction, Graphic Novels, Historical Fiction, History, Horror, Humor And Comedy, Manga, Memoir, Music, Mystery, Non Fiction, Paranormal, Philosophy, Poetry, Psychology, Religion, Romance, Science, Science Fiction, Self Help, Suspense, Spirituality, Sports, Thriller, Travel, Young Adult,
    Are you sure you want to  Yes  No
    Your message goes here

Technology Initial Public Offerings - Legal and Practical Considerations for Issuers Listing on the TSX

  2. 2. CONTENTS1. Advantages and Disadvantages of Going Public2. IPO Readiness: Steps to Prepare in the 12 Months Before an IPO3. Which market: TSX vs. NASDAQ4. IPO Process5. Special Issues for U.S. Companies Going Public on the TSX 2
  3. 3. Why go public?: Advantages• Raising capital• Liquidity for investors• Enhanced ability to offer equity incentives to employees• Enhanced ability to fund M&A activity (either through cash or freely-tradable shares)• Perception among customers, suppliers, lenders and others of greater stability and accountability 3
  4. 4. IPO: Disadvantages• Risk of non-closure: volatile markets mean that IPO window opens and closes very quickly• Constant pressure to meet/exceed analyst and market expectations• Historical performance and to a certain extent, new business plans, must be publicly disclosed• Low trading volumes (a problem on the TSX) can limit liquidity• If less than $100 million post-IPO market cap, Canadian securities laws require 18-month statutory escrow for directors, officers, 20% shareholders & 10% shareholders with board nominees• Regulatory/enforcement environment places new pressures on Board and management• Risk of securities class actions• Vulnerability to proxy contests and unsolicited take-over bids – few defenses are available to Canadian public companies 4
  6. 6. Assessing IPO Readiness 1. Financial Performance 2. Size of Offering 3. Board of Directors/Board Committees 4. Other Corporate Governance 5. Management 6. Shareholders 7. Employees 8. Due Diligence 9. Communications/Publicity 10. Material Contracts 11. Cheap Stock 12. Financial Statements/IFRS Conversion 13. Other Things to Think About 6
  7. 7. IPO Readiness – Financial Performance• Underwriters often have minimum revenue/profitability benchmarks for technology issuers: – TSX: annual revenues of at least $40M and multiple quarters of profitability – NASDAQ: annual revenues of at least $100M and established track record of profitability• Other critical factors for technology companies: – Expectation for margins of 50% + depending on the specific sector – Growth prospects over 2 and 5 year periods – Strategy for product and customer diversification – Addressable market size• Meet early with potential underwriters to assess benchmarks in your sector 7
  8. 8. IPO Readiness – Size of Offering• Most underwriters have a minimum offering size: – TSX: $20-40M – NASDAQ: $60M• Offering should be large enough to create post-IPO liquidity• Many Canadian underwriters prefer that 100% of IPO is a treasury offering (all proceeds go the company), limiting the scope to effect a secondary offering for significant pre-IPO investors 8
  9. 9. IPO Readiness – Board of Directors• Expectations for Board governance have been established by institutional investors and Canadian securities regulators: – Majority of board members should be independent (e.g., 4/6, 4/7, 5/8, 5/9, 6/10) (note: TSX requires at least 2 independent directors) – Independent Board chair (or independent “lead director”)• At least some directors should have public company experience• Board size: Board should be large enough so there are enough independents to staff committees, but small enough to facilitate decision making (ideal Board size for small-cap/mid- cap companies is 7) 9
  10. 10. IPO Readiness – Board of Directors (Con’t)• Independent Board members will expect: – appropriate cash/option incentives – adequate D&O insurance coverage – contractual indemnification agreements• The bottom line is that 6 months to 1 year of lead time is usually required to recruit and familiarize a properly- constituted Board (particularly for VC-backed companies, which often have Boards dominated by investor representatives) 10
  11. 11. IPO Readiness – Board Committees • Minimum securities regulatory requirement: • Audit Committee composed of three independent directors (subject to a limited one-year post-IPO grace period) • All Audit Committee members must be “financially literate” • Market expectations: • at least Chair of Audit Committee will be a Chartered Accountant (or equivalent designation) • separate Compensation Committee composed of a majority of independent directors (ideally 100% independent directors) • separate Nominating and Governance Committee composed of a majority of independent directors (ideally 100% independent directors) 11
  12. 12. IPO Readiness – Corporate Governance – Canadian securities regulators have published governance guidelines, including: • Director independence requirements • Formal written mandates and position descriptions for Board and Committee chairs • Written Code of Conduct and Business Ethics, which will be made publicly available • Regular “in camera” Board meetings without management present • Composition of board committees – These guidelines are not mandatory, but there is a “disclose and justify” requirement if guidelines are not followed 12
  13. 13. IPO Readiness – Management• Underwriters attribute great importance to the strength of the management team• For TSX IPOs it is desirable (but not strictly necessary) for CEO and CFO to have public company experience• Executive employment agreements should be aligned with market and key employee expectations, especially provisions related to: – change of control (including option acceleration) – termination – non-competition/non-solicitation 13
  14. 14. IPO Readiness – Shareholders• Review registration rights agreements to check for rights to require or participate in a secondary offering• Underwriters usually require all directors, officers, significant pre-IPO shareholders to sign 6-12 month post-IPO lock-ups: shareholder agreements, option plans, warrants should contain lock-up provisions from the outset• Preferred shares will generally need to be eliminated/converted to common shares on the IPO• Other shareholder action may be required before the IPO to clean up capital structure, remove “private company” restrictions, implement stock split/consolidation, amend by- laws, etc. 14
  15. 15. IPO Readiness – Employees• Employee equity incentive plans will often need to be amended before the IPO: – to comply with stock exchange requirements – to provide additional flexibility to deal with options on a future acquisition of the company• Plans should be carefully designed before the IPO, as stock exchange rules could constrain ability to amend the plan after the company is public (for example, by requiring shareholder approval for amendments)• In IPO lead-up, employee information sessions are recommended to familiarize employees with new public company processes (publicity, codes of conducts) 15
  16. 16. IPO Readiness – Prepare for Due Diligence• Underwriters due diligence will focus on company’s business, industry, products/services, suppliers, growth strategy/projections, material contracts, IP, human resources, regulatory compliance, financial statements• Well in advance of IPO, review a standard underwriters’ due diligence checklist and identify any record-keeping deficiencies• Expect underwriters to conduct key customer and supplier reference calls and plan accordingly• Due diligence will include a detailed minute book review to verify capitalization: it will cost more in fees and “impression” to clean up minute books than it will to take care of them in the first instance 16
  17. 17. IPO Readiness – Public Communications• Ensure company’s news releases, website and public communications do not contain financial projections, forecasts, overreaching statements, or any commentary that could “prime” the market  “gun jumping” is a serious matter and could result in regulatory action to delay the IPO• Formal communications policy should be established, with assistance of legal counsel, in the months leading up to the IPO 17
  18. 18. IPO Readiness – Material Contracts• Material contracts will need to be publicly filed as part of IPO – conduct early review with legal counsel to determine requirements and properly set customer/supplier expectations• Try to avoid change-of-control restrictions in material contracts, as these can be especially difficult to manage for public companies• Confidentiality provisions in material contracts should allow for disclosures if “required by applicable securities laws or stock exchange rules or policies” 18
  19. 19. IPO Readiness – “Cheap Stock”• Historically Canadian securities regulators have not been concerned with “cheap stock” (pre-IPO shares issued for less than IPO price in the lead-up to the IPO)  but recently, Canadian regulators have started reviewing pre-IPO issuances to directors, officers, promoters, 10% shareholders• If IPO investors will receive an “unconscionably low percentage of ownership” compared to capital invested, Canadian Securities Administrators (CSA) staff may recommend against receipting the IPO prospectus• No quantitative guidance has been published• Issuers need to be prepared to justify pricing of pre-IPO shares and options; consider using a third party valuator if IPO is imminent 19
  20. 20. IPO Readiness – Financial Statements• IPO prospectus requirements include: – 3 years of annual financial statements and 2 years of balance sheet data – must be AUDITED (note: 3rd year can be dropped if audited 9-month statements are included and business is not seasonal) – Comparative interim financial statements for the quarter and year-to-date period ended more than 45 days before the date of the prospectus - must be REVIEWED by auditors• Financial statements in prospectus may become stale and need to be updated before IPO closing – important to organize timeline appropriately• Common areas of securities commission review for technology companies: – Need for going concern note – Acquisition accounting – Requirement for segmentation – Revenue recognition, especially for software companies 20
  21. 21. IPO Readiness – IFRS Requirements• IFRS Transition Information: – IPO prospectus must include an opening statement of financial position as of the date of transition to IFRS, and – IFRS 1 reconciliations for the date of transition and most recent annual period• See OSC Corporate Finance – IFRS Release No. 4 for summary requirements for: – Presentation of IFRS transition information in prospectuses – GAAP for financial statements in prospectuses filed in the year of transition – GAAP for financial statements in IPO prospectuses filed in the first year after transition 110818_ifrs-release4-prospectus-issues.pdf 21
  22. 22. IPO Readiness – Other• Increase D&O insurance coverage – ideally before IPO marketing begins.• IPO can raise stakes on outstanding litigation/disputes, so attempt to resolve before filing if possible.• Consider unwinding related party transactions involving insiders (e.g., loans by the company to directors, officers or principal shareholders).• Many companies conduct a pre-IPO “market check” or “dual track” M&A process to consider acquisition opportunities prior to the IPO.• Consider implementation of shareholder rights plan to better control the timing and process of any unsolicited take-over bid after the IPO (although consult with underwriters in advance, as this can send the wrong message to investors). 22
  24. 24. Which Exchange: TSX or NASDAQ? NASDAQ TSXPrestige Can provide issuer with Lower profile & Canadian focus. greater profile and Much stronger in mining/energy validation in U.S. and global than technology/industrial listings. markets.Access to Greater potential for broad Friendly environment, includingCapital investor base and higher analyst coverage, for small-cap or trading volumes. mid-cap issuers. Balance between Dominated by companies institutional and retail investors. with market cap in excess Home base advantage for of $500M. Smaller Canadian issuers. Can provide companies can be stepping stone to listing on other “stranded” with no analyst exchanges including NASDAQ or coverage and/or thinly NYSE. traded stock. 24
  25. 25. Which Exchange: TSX or NASDAQ? NASDAQ TSXProcess/ SEC review required (unless 3-6 month timeline from date ofTimeline company is already public in first organizational meeting. Canada and can use MJDS). Canadian securities regulatory Minimum 6 month timeline review process is streamlined from date of first compared to SEC process: average organizational meeting. time from filing of preliminary IPO prospectus to receipting of final prospectus is 30-40 days.Regulatory SOX compliance required, No SOX compliance for CanadianBurden including auditor attestation issuers. In many respects, Canadian of internal controls. requirements otherwise align to Exemption may be available U.S. requirements. recent JOBS Act reforms. 25
  26. 26. Which Exchange: TSX or NASDAQ? NASDAQ TSXCosts Underwriting discount and Underwriting discount and commission typically 7% of commission typically 5-7% of gross proceeds. IPO and gross proceeds. IPO and ongoing legal/accounting ongoing legal/accounting costs costs higher in U.S. generally significantly less in Canada.Accounting U.S. GAAP permitted. IFRS required (unless issuer isPrinciples also public in the U.S.).Escrow None, other than Statutory escrow if post-IPORequirements contractual underwriter market capitalization is less lock-ups. than C$100 million. 26
  27. 27. Which Exchange: TSX or NASDAQ?• A Canadian-incorporated, TSX-listed company can interlist on Nasdaq using the Multi-jurisdictional Disclosure System (MJDS)• The MJDS process is much quicker than a traditional NASDAQ IPO• Requirements for southbound MJDS – Issuer must be Canadian incorporated and public in Canada for at least 12 months – Issuer must be a “foreign private issuer” for U.S. securities law purposes – Issuer must have market cap of at least US$75M 27
  28. 28. TSX IPO Process, Steps and Timeline 28
  29. 29. TSX IPO Process, Steps and Timeline 1. Select Underwriter 2. Kick-off Meeting 3. Draft Preliminary Prospectus 4. Due Diligence 5. Engagement Letter & Formation of Underwriting Syndicate 6. Filing of Preliminary Prospectus and Regulatory Review 7. The Road Show 8. Pricing and Filing of Final Prospectus 9. Over-Allotment 10.Post-IPO Compliance 29
  30. 30. Sample IPO Timeline – TSX(Issuer with calendar year end)August September OctoberAugust 1 - 10: September 1: First two weeks of October:• Select underwriter • Preliminary prospectus • Clear remaining regulatory• Pre-filing discussions with TSX substantially complete comments• Determine whether offering will • Obtain TSX conditional listinginclude Quebec – if yes, start Sept. 14/15: approvaltranslating financial statements • Oral due diligence session • Investor road show• Initial organizational meeting, • Customer reference calls byincluding management underwriters End of October:presentation to working group • Engagement letter signed and • Deal is priced and underwriting underwriters form syndicate agreement is signedAugust 10 – August 30: • File preliminary prospectus (with • File final prospectus• Drafting sessions Q2 financials) • Closing 3-5 days after pricing• Issuer populates electronic data • Submit TSX listing applicationroom Note:• Underwriters concurrently End of September: Preliminary prospectus will have toperform due diligence • First comment letter received be amended to include Q3 from principal regulator financial statements for filings after November 15 30
  31. 31. 1. Selecting the Underwriter• Underwriter must be the right match for the sector and the size of the deal. A larger more prestigious bank may not be the best fit, unless leads have a high level of interest in the company.• Informal meetings with prospective underwriters may start 1-2 years before IPO.• Final selection of underwriters is often a formal competitive process conducted by the issuer’s board.• Factors in selection: reputation; experience in sector; distribution capability; aftermarket performance; research department; continuing financial advisory and M&A services; fee expectations.• Underwriters can never guarantee an IPO price, but pricing range should be extensively discussed in order to prevent significant discrepancies in expectations. 31
  32. 32. 2. Kick-Off Meeting• After underwriters are selected, an initial organizational meeting will be held including: – representatives of the issuer (CEO, CFO, other senior business development personnel) – legal counsel for the issuer and underwriter – issuer’s auditors• Responsibility for gathering information and preparing initial drafts of various sections of the preliminary prospectus will be allocated.• Preliminary timelines will be settled.• Logistics for selection of printers, transfer agent, etc. will be discussed. 32
  33. 33. 3. Drafting the Preliminary Prospectus• Prospectus serves two purposes that must be balanced: – A liability document: a prospectus must not contain an untrue statement of a material fact or omit to state a material fact that is required to make a statement not misleading – A marketing document: will be used by the underwriters to sell the securities• A “material fact” is a fact that significantly affects, or would reasonably be expected to have a significant effect on, the market price or value of the securities being offered.• Although balancing conflicting purposes may result in a less glowing report on the issuer, it is better to err on the side of caution than to unrealistically raise expectations.• Inclusion of projections, forecasts and other forward-looking financial information is particularly sensitive and must be reviewed carefully with underwriters. 33
  34. 34. 3. Drafting the Preliminary ProspectusPractical Tips:• All prospectuses follow a similar format. The best preparation for prospectus drafting is reviewing prospectuses by similar companies.• Sections dealing with the market and industry will require back-up through third party reports (e.g., IDC, Gartner). Since reports must be paid for and the consent of the third parties obtained, determine early which references will be used. 34
  35. 35. 3. Drafting the Preliminary Prospectus• Most Canadian prospectuses now follow a plain English format, but examples of a more formal drafting style still exist. The working group should decide on a uniform approach.• Developing Management’s Discussion and Analysis (MD&A) can be very time consuming, especially given competing demands on the CFO’s attention. Try to allocate specific blocks of time for this task.• Expect to hold several in-person drafting sessions with the working group over a 3-4 week period, especially on the “Business” sections of the prospectus. 35
  36. 36. 4. Underwriter Due Diligence• Due diligence is usually carried on at the same time as prospectus drafting. Most due diligence should be completed before filing of preliminary prospectus. However, high-level diligence will continue until the completion of the offering.• Underwriters will provide a due diligence checklist of documentary requests - issuer responds by populating virtual data room. Expect follow-up documentary requests and questions.• Underwriters’ counsel will prepare “circle up” of financial information in the prospectus  auditors will be required to provide comfort on circled items (extent of comfort is often heavily negotiated). 36
  37. 37. 4. Underwriter Due Diligence• Directors and officers will be asked to fill out detailed D&O questionnaires to confirm the information in the draft prospectus.• Business due diligence may take the form of site visits, customer calls, or supplier reference checks. These usually occur fairly late in the process (e.g., in the days before the filing the preliminary prospectus).• Oral due diligence sessions will be held immediately before the filing of preliminary and final prospectus – management, auditors, legal counsel will be required to respond to detailed questions on the prospectus and the business more generally.• Underwriters can be expected to conduct their own background checks on senior management. 37
  38. 38. 5. Underwriting Engagement Letter andSyndication• Careful review of the engagement letter will mean that much of the underwriting agreement, except for pricing, will be boilerplate.• Some of the principal terms of underwriters’ engagement that may be contained in the engagement letter: – Size of offering – Split between treasury and secondary offering – Underwriting commission/discounts – “Fully underwritten” vs. “best efforts” underwriting – Syndication position of lead underwriter – Expense reimbursement (including cap) – Alternative transaction fee (including trailer) – Indemnification of underwriter 38
  39. 39. 5. Underwriting Engagement Letter andSyndication• Lead underwriter will co-ordinate syndication with other underwriters, usually several days before the preliminary prospectus is filed. The issuer should play an active role in selecting the syndicate members. 39
  40. 40. 6. Filing of Preliminary Prospectus andRegulatory Review – Where to File• For most IPOs, issuers file in all Canadian provinces and territories• If the issuer’s head office is in Quebec, or the underwriters want to offer securities in Quebec, the preliminary prospectus will have to be translated/filed in French. Two sets of translators are used: financial translators for the financial statements, notes and MD&A, and legal translators for the rest.• Under the CSA’s Passport system, one province is the principal regulator and the issuer will usually only deal with the securities commission in that province 40
  41. 41. 6. Filing of Preliminary Prospectus andRegulatory Review - Timing• The principal regulator will use best efforts to provide a first comment letter within 10 working days of the date of the preliminary prospectus.• The issuer responds to the principal regulator through a formal exchange of correspondence, as well as telephone/email.• The principal regulator will use best efforts to provide subsequent comment letters within 3 working days after the filing of an amended preliminary prospectus.• A confidential pre-filing with the principal regulator may be recommended if the filing raises novel or substantive issues or novel policy concerns. 41
  42. 42. 6. Filing of Preliminary Prospectus andRegulatory Review• TSX or other stock exchange review of the preliminary prospectus will take place concurrently with review by the securities commission; however, the TSX expects the issuer to initiate a pre-filing discussion several weeks before the preliminary prospectus is filed.• Final prospectus can be filed once principal regulator is satisfied with responses to all comments, has reviewed a draft of the final prospectus, and has cleared the issuer to file final materials. 42
  43. 43. 6. Filing of Preliminary Prospectus andRegulatory Review• The period between obtaining the receipt for the preliminary and final prospectus is known as the “waiting period”.• During the waiting period, the issuer should observe restrictions on publicity, including product sales campaigns. Sales literature and activities, including press releases, should be reviewed by legal counsel during this period. 43
  44. 44. 7. Road Show• The road show can commence once a receipt for the preliminary prospectus has been obtained.• Issuer is usually represented by CEO and CFO.• For a TSX IPO, meetings are conducted in-person in financial centers across North America and sometimes Europe.• Road show activities overlap with prospectus regulatory review and a sensitive period for the business – issuer needs management and finance team depth to manage competing demands. 44
  45. 45. 8. Pricing and Filing the Final Prospectus• Underwriters will develop a preliminary view on pricing toward the end of the road show.• Process for pricing and “going final”: – Once underwriters have compiled their book, they will present proposed pricing to issuer’s board – Issuer’s board approves the transaction – Underwriting agreement is signed – Prospectus is finalized by filling in price/number of shares, and any price dependent information – Final prospectus is filed, receipted and delivered to investors – Statutory period to allow exercise of rescission rights elapses – Closing occurs 3-5 business days after filing of final prospectus – On closing, shares are issued and trading commences 45
  46. 46. 8. Pricing and Filing the Final Prospectus• Alternative PREP procedures allow final prospectus to be filed without pricing information – issuer merely has to file “pricing supplement”, which does not require regulatory review.• Pricing will also determine statutory escrow requirements. Escrow will apply if the post-IPO market capitalization is less than Cdn$100M. 46
  47. 47. 9. Over-Allotment/Green Shoe• Gives underwriter option to acquire additional securities after the initial IPO closing.• Over-allotment option is limited to a maximum of 15% of original offering.• Underwriters will use the over-allotment securities to cover an over-subscribed book.• If share price declines after the initial IPO closing, underwriters will instead cover over-subscriptions by buying in the market, supporting the IPO price. 47
  48. 48. 10. Post-IPO Compliance• Management must be ready for annual/quarterly reporting cycles.• Quarterly financial statements, MD&A and CEO/CFO certifications: – filings are due 45 days after quarter-end for TSX issuers – financial statements must be approved by the Board (Board approval usually given only on recommendation of Audit Committee) – practice is for financial statements to be reviewed by auditors; if no review, or auditors cannot complete review or express a reservation, this must be disclosed 48
  49. 49. 10. Post-IPO Compliance• Audited annual financial statements, annual MD&A and Annual Information Form (AIF) must be filed 90 days after year-end for TSX companies• Annual shareholders meeting must take place within 180 days after year-end under most corporate statutes and TSX rules; first notice must be filed at least 55 days before the meeting to comply with notice and record requirements under securities laws 49
  50. 50. 10. Post-IPO Compliance• Periodic disclosure requirements must be monitored: – Material change reports - 10 days after material change – Filing of new material contracts – Business acquisition reports for significant acquisitions (note: required audited historical financial statements for the target and audited pro forma financial statements) – 75 days after closing – Change of auditor notices 50
  51. 51. 10. Post-IPO Compliance• Timely disclosure requirements: – All “material information” must be announced by press release under TSX timely disclosure policy – It can be difficult to determine what is material until there is a track record of how markets react to corporate announcements – Adoption of formal disclosure policy and management disclosure committee recommended 51
  53. 53. U.S.-incorporated Issuers• U.S.-incorporated companies going public on the TSX will need to comply with both U.S. and Canadian securities laws.• TSX IPO process will be significant influenced by U.S. issuer’s approach to U.S. securities law compliance: – Option A: Full compliance – file concurrent U.S. registration statement and comply with U.S. securities legislation, including SOX. – Option B: Exemption – stay below thresholds on number of shareholders of record and issue shares only in registration-exempt transactions  shares will trade on the TSX with a “.S” designation. This can limit liquidity for investors. 53
  54. 54. • Full compliance with U.S. regime has some advantages for U.S.-incorporated issuers: – U.S. registration statement can generally be “wrapped” with Canada-specific information and certifications to comprise a Canadian long-form prospectus – U.S. issuer can continue to use U.S. GAAP and will not need to convert to IFRS or provide reconciliations – U.S. issuer will be able to complete continuous disclosure filings using U.S. forms once it is northbound-MJDS eligible (requirements: must be public in the U.S. for 12 months and have a public float of at least USD$75M) – This can be good approach if the TSX offering is seen as a stepping stone to NASDAQ 54
  55. 55. • A further alternative is to reorganize the U.S. issuer outside of the United States so that it can go public on the TSX as a “foreign private issuer” (FPI) – this can be challenging from securities and tax law perspective, and is only worthwhile if the issuer is confident that it will continue to qualify as a FPI for a significant period of time post-closing 55
  56. 56. Andrea