Canada: Wealth Creation In Quebec: The Missing Link

Last Updated: December 17 2014
Article by Claude Désy

The Quebec Stock Savings Plan is slated to end on December 31, 2014, and Quebec counts for only 7% of the corporations listed on the exchanges of the TMX Group, whereas the province's economic weight in the Canadian economy is 20%. By comparison, 33% of the corporations listed on TMX Group exchanges are from Ontario and 50% are from Western Canada. In 2013, only 5.3% of new listings on those exchanges were by Quebec corporations, versus 11% from abroad. That same year, all of the listed Canadian corporations raised an aggregate of $43.6 billion, versus only $4 billion by corporations from Quebec, and of the 59 new exchange listings of structured products, none was from Quebec.1 Quebec is thus far from fully benefitting from Canadian securities exchanges, which have a solid reputation and are known for supporting SMBs.2

There was a time when Quebec succeeded in listing many SMBs on the stock market, some of which went on to become giants, such as CGI, Québecor, Couche-Tard and Jean Coutu, to name but a few. While their initial public offerings raised only modest amounts, the exercise gave these SMBs a higher valuation than when they were private companies, as well as access to new and less costly sources of financing and, above all, a keystone for expansion, in the form of publicly tradable shares. These corporations, run by visionary builders, became major consolidators through mergers and acquisitions. Thus, improved prospects for future growth can be seen as the primary reason for listing on an exchange.3 The Quebec financial ecosystem has evidently changed significantly since then.

It should first of all be emphasized that for a junior company an exchange listing is not always the best course: it is not within the means of every small business and is not necessarily suited to the personality of the owner of the business. And when listing is a viable option, the environment must be favourable if the exercise is to be successful.

It must also be acknowledged that there has been a decline in exchange listings in Quebec and Canada, as well as in the United States, for a variety of reasons of which some are structural,4 on both the general and local levels. In particular, there is an increasing recourse to pre-IPO private financing, plus a pronounced aversion to reputational risk on the part of the investing financial institutions, and an evolution of sorts in the role of securities brokers, who have gone from investment advisors to asset managers proposing a selection of investments that are often pre-packaged and carefully structured by the brokerages, leaving little room in the market for SMBs aspiring to go public. Another factor that should not be underplayed is the swallowing up of innovative Quebec technology companies by larger corporations, most of which are already listed on an exchange. In addition, Quebec has its own ways of doing things.

Going public is an operation that often must coincide with a favourable stock market cycle for the type of business involved. To seize an opportune moment, the company must be ready and well organized. Unfortunately, Quebec businesses tend not to make their move until the favourable market cycle is peaking, and only a few are successful at listing.5

Financial sector

The dynamic nature of Quebec's financial sector is often vaunted, particularly in connection with its investment sector. And while it is true that there are many high quality firms in Quebec engaged in those activities, in the context of an analysis on contributing to wealth creation it is important to differentiate between the "buy side" and "sell side" of the financial sector.

The firms alluded to above are definitely successful in terms of investing (the buy side). However, the "sell side" of Quebec's financial sector, insofar as it involves SMBs, is not nearly as developed. This situation has far from negligible consequences for our economy and for wealth and job creation. By way of example, the major banking institutions in Quebec provide corporate finance services through their securities brokerages, i.e. their investment bankers, who cater primarily to companies of a certain size. In 2010 at a conference on this issue, Jacques Ménard, the chairman of BMO Nesbitt Burns and president of BMO Financial Group, Quebec, pointed out that in Canada taking SMBs public is the stock-in-trade of small brokerages, often termed "boutiques", and that very few of them are present in Quebec.6

In order to succeed in obtaining an exchange listing, the aspiring issuer must be well prepared and have the support of both key investors and the local public financing milieu. The operation thus requires both specific expertise and a favourable local environment. The sad reality is that both of those aspects are lacking in Quebec.

What's missing in Quebec

The globalization of equity markets necessitates heightened visibility and access to investors in both Canada and abroad, which publicly listed companies often enjoy. They also benefit from an expanded network, greater opportunities for mergers and acquisitions, and access to new types of financing.

Canadian securities exchanges have a reputation for welcoming SMBs as public issuers.7 That being so, why is Quebec not part of this scenario? Whatever the answer may be, this situation has to change.

While many feel that any such change will be slow and protracted,8 Quebec should nonetheless immediately set about establishing a public financing sector for SMBs that is permanent, dynamic and open to a changing economy, and which integrates investment bankers, analysts, retail and institutional brokers and market makers, and is accompanied by fiscal and other incentives.

The lack of this segment in Quebec's financing sector results in the following:

  • fewer investment opportunities for Quebec companies and investors;
  • departures from Quebec of businesses and entrepreneurs who move to a more propitious investment climate;
  • the absence of a means for entrepreneurs to monetize the value they have built up in their businesses when they retire;
  • the sale of innovative Quebec companies to foreign corporations – over the last ten years, in Canada and to a lesser degree in Quebec, bulk sales by venture capital firms have predominantly been to foreign buyers;
  • fewer opportunities to realize value on the part of Quebec investment funds;
  • the absence of the mobilizing and stimulating effects of a public listing for Quebec entrepreneurs;
  • a lack of synergy between our businesses and markets outside Quebec.

This situation negatively impacts:

  • access to long-term development capital;
  • integration with international capital funding networks;
  • the ability of certain Quebec companies to realize their full value;
  • return of capital from government incentives;
  • access to new sources of financing;
  • job creation and preservation;
  • the vulnerability of Quebec businesses, who are too often gobbled up by public companies instead of becoming consolidators themselves;
  • the visibility that some businesses deserve.

Some considerations

Quebec must implement long-term structural measures so that listing on an exchange becomes a viable alternative for Quebec corporations that are willing and able to do so.

Measures to consider for the sustainable structuring of the "sell side" of Quebec's financial sector include the following:

  • incentives for the creation of units within Quebec financial services corporations composed of investment bankers dedicated to taking SMBs public. They could, for example, be offered incentives similar to those for international financial centres;
  • simplify the financial information reporting rules applicable to public SMBs;
  • use the latest information technology in order to adapt to current methods and accelerate the process for listing and maintaining an exchange listing, at the lowest possible cost;
  • incentivize brokerages to include stakes in junior issuers in their clients' investment options;
  • ensure that universities and professional associations offer relevant continuing education courses;
  • make incentives for investing in junior issuers available to Quebec-based and other investment funds;
  • better inform Quebec investors on the risk-return ratio of investments in junior issuers;9
  • revise the Quebec Stock Savings Plan II to make it more attractive for Quebec corporations and investors;
  • amend Quebec's income tax laws so that listing on an exchange by an SMB no longer results in the loss of tax benefits;
  • implement measures promoting the emergence of managers specialized in exchange-listed structured products.

The potential for SMBs to list their shares on a stock exchange is an important component of a healthy economy. This is borne out by the reaction of entrepreneurs, professionals and government in the United States when it became apparent that the number of publicly listed American SMBs was stagnating. To remedy this, several economic measures to stimulate that segment of the economy were hurriedly put in place, including the federal Jumpstart our Business Startups Act (Jobs Act).

Let's hope that Quebec follows the same course by adding to its wealth-creation toolbox a series of measures that, through converging incentives and policies, encourages more Quebec corporations to become publicly listed.

1 TMX Group, December 2013.

2 Pandes, J. A., Robinson, M. J., "Is Effective Junior Equity Market Regulation Possible?" (2014) Vol. 70: No. 4 Financial Analysis Journal, 42-54.

3 Celikyurt, U., Sevilir, M., & Shivdasani, A., "How an IPO Helps in M&A" (2010) Vol. 22: No. 2 Journal of Applied Corporate Finance", 94-99.

4 B.C. Tingle, J.A. Pandes et M.J. Robinson, "The IPO Market in Canada: what a comparison with the United-States tells us about a global problem", Canadian Business Law Journal, Vol. 54, 2013, p. 321 et ss.

5 PWC & FMC (now Dentons), "Pour une démocratisation du financement de nos entreprises" (2011).

6 Ménard, J., "A Perspective on the Canadian IPO Marketplace" (breakfast conference organized by Réseau Capital, April 29, 2010).

7 Carpentier, C., Suret, J.-M., "The Canadian Public Venture Capital Market", Report prepared for the Autorité des marchés financiers du Québec, January 21, 2009; Pandes, J. A., Robinson, M. J., "Is Effective Junior Equity Market Regulation Possible?" (2014) Vol. 70: No. 4 Financial Analysis Journal, 42-54.

8 Ragan, C., "What Now? Addressing the Burden of Canada's Slow-Growth Recovery" (2014) 413 C. D. Howe Institute Commentary.

9 Carpentier, C., Suret, J.-M., « Connaissance financière et rationalité des investisseurs : une étude canadienne » (Autorité des marchés financiers du Québec, September 1, 2011).

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
Stikeman Elliott LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
Stikeman Elliott LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions