Where to List: Canadian Stock Exchanges
The three Canadian exchanges for equity securities are:
In a Nutshell: The Process of Going Public
There are a few different alternatives for companies to consider when making the go public decision, for the purposes of this post we will be discussing the most common and traditional method; an initial public offering or IPO. Generally speaking, the three main steps involved in becoming listed on a Canadian stock exchange via an IPO are:
- Complete a listing application and demonstrate that the company is able to meet the relevant listing requirements. There are several supporting documents that must accompany the listing application, many of which require the help of professionals such as lawyers and accountants.
- File a prospectus with financial statements prepared in accordance with International Financial Reporting Standards. A prospectus is a formal legal document that provides details of an investment offering to the public. The prospectus is usually drafted by your lawyer and requires the input and advice of your accountants and auditors. (Tip: Private companies who have maintained financial statements are often at an advantage when they want to go public. Having accurate and reliable accounting information often translates into significant time and cost savings.)
- Perform the underwriters’ due diligence, which includes the analysis of the company’s business operations, management, business plan, financial position and outlook. Part of the company’s accountants’ role would also be to work closely with the underwriters, lawyers and auditors.
There are many variables to consider, but in broad terms this entire process can take anywhere between 90 and 150 days depending how prepared management is at the start of the process. The key advisors and professionals to have on your team are your lawyer, your accountant, your auditors, and an underwriting firm.
Once your company is listed, you are required to meet certain corporate governance requirements and to have sufficient internal controls for management and financial reporting. Having adequate reporting and control systems in place before going public is vital to facilitating the transition from private to public. Your accountant or CFO is often tasked with developing reporting and control systems that are capable of meeting those requirements.
Each of the Exchanges outlines their own listing requirements. For more information on the TSX and TSX-V, review their Listing Guides. For the CSE, see the listing requirements section on their website.
In Summary: The Pros and Cons of Going Public
Going public offers numerous advantages, mainly:
- It may be the only way to access equity capital for early stage companies
- Equity capital comes without the interest costs associated with debt
- Increased liquidity for shareholders
- The ability to issue shares as compensation to management and asset acquisitions
But with privilege comes responsibility, and the duties of a publicly-traded company can often be onerous. In addition to the initial costs of going public, there are also ongoing costs in order to meet continuous disclosure requirements. With more requirements for public disclosure, management is under greater scrutiny and pressure to perform, and the obligation to publicly disclose significant transactions and affairs of the company can be complicated and challenging.
Becoming a publicly traded company definitely has its benefits. But since it can be a complex and lengthy process, companies should tread the waters carefully. Knowing when to ask for professional help is essential. Make sure to consult with your trusted advisors and experienced professionals to get clear insights and guidance.