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IPO
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RMT
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SPAC
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CPC
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RTO
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Perception
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- Traditional method, most common and well known route to the
public markets.
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- Relatively new method, limited success in Canada.
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- Well understood method; suitable for smaller issuers.
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- Historical successes in oil and gas and mining (primarily on
the TSXV), with recent success in cannabis and green
industries (primarily on the CSE).
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Timing
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Stock
Exchanges
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Size
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- The majority of new listings on the TSX (the exchange for
senior issuers) are IPOs, with the market capitalization of new IPO
listings ranging from ~$44 million to $7 billion (YTD December
2022).
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- In the past 10 years, 11 QAs have been completed on the TSX,
with the market capitalization of the issuer ranging from ~$68
million to $1.5 billion (2022).
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- The majority of new listings on the TSXV are CPCs and the
issuers resulting from CPC QTs, with the market capitalization of
such resulting issuers being ~$14 to $189 million (YTD December
2022).
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- RTOs are completed on all exchanges, with the market
capitalization of new RTO listings ranging from ~$4 to $44million
on the TSXV and ~$2.4 to $4 billion on the TSX (YTD December
2022).
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Pricing & Marketing
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- Share price determined at time of the IPO between underwriters
and PrivateCo.
- Intensive marketing.
- Price subject to market volatility.
- Risk of IPO timing being rescheduled due to market volatility
and underwriter timelines.
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- Share price determined at beginning of transaction between
principals of SPAC and PrivateCo as part of merger
negotiations.
- No marketing required unless concurrent financing
undertaken.
- SPAC QA success unrelated to market volatility.
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- Share price determined at beginning of transaction between
principals of CPC and PrivateCo as part of merger
negotiations.
- No marketing required unless concurrent financing
undertaken.
- CPC QT success unrelated to market volatility.
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- Share exchange ratio determined at beginning of transaction
between RTO issuer and PrivateCo as part of merger
negotiations.
- No marketing required unless concurrent financing
undertaken.
- RTO transaction success unrelated to market volatility.
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Costs
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- Full range of direct costs.5
- Typical underwriter fees: 4%-6% on the TSX and up to 12% on the
TSXV, NEO and CSE.
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- Lower direct costs than IPO, as the listed issuer (SPAC, CPC or
RTO issuer) is already publically listed.5
- Higher indirect costs associated with due diligence of the
PrivateCo or RTO issuer and negotiating and implementing the
RMT.
- Financial advisory fees depend on the size and structure of the
transaction.
- Sponsor fees (if required).
- Agency fees if a concurrent financing is undertaken.
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Process
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- Comprehensive diligence and preparation of documentation
disclosing all relevant information about the PrivateCo's
business.
- Extensive engagement with underwriters and market
analysts.
- Stringent securities commissions review.
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- SPAC undertakes IPO to raise capital for a QA.
- Merger is completed through a QA post-listing of the SPAC, with
shareholders of SPAC approving the QA, if required.
- Comprehensive diligence and preparation of documentation
disclosing all relevant information about the PrivateCo's
business.
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- CPC undertakes IPO to raise capital for a QT.
- Merger is completed through a QT post-listing of the CPC, with
shareholders of the CPC. approving the QT, if required.
- Comprehensive diligence and preparation of documentation
disclosing all relevant information about the PrivateCo's
business.
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- Merger is completed through a RTO transaction, with
shareholders of RTO issuer approving the RTO.
- Additional financing and other corporate transactions possible
(which may require PrivateCo and RTO issuer approvals).
- Comprehensive diligence and preparation of documentation
disclosing all relevant information about the PrivateCo's
business and the RTO issuer.
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Disclosure
Requirements (see also "General Disclosure
obligations for IPOs, SPACs, CPCs and RTOs")
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- Preliminary Prospectus and Final Prospectus.
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- RMT merger agreement between PrivateCo and listed issuer (SPAC,
CPC or RTO issuer) (i.e., share acquisition, plan of arrangement,
amalgamation, etc.).
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- Information circular (if shareholder approval required), which
would include prospectus level disclosure.
- Non-offering prospectus or IPO prospectus in respect of the
QA.
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- Information circular (if shareholder approval required) and/or
filing statement, which would include prospectus level
disclosure.
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- Information circular (if shareholder approval required) and/or
filing statement, which would include prospectus level
disclosure.
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Reviewing Authorities
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- Securities commissions (for preliminary and final
prospectus).
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- Primarily stock exchanges (subject to limitations imposed by
securities commissions under applicable securities laws and review
by securities commissions of a non-offering prospectus or an IPO
prospectus of a SPAC).
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Sponsorship
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- Sponsorship may be required.
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Due Diligence/
Contingent
Liabilities
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- Extensive diligence is required to provide disclosure of all
material facts in prospectus.
- Liabilities and litigation risks that existed while private
continue through the going public event.
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- Diligence of SPAC shell limited given SPAC has no operating
business (and limited litigation risk).
- Fulsome diligence must be completed by SPAC on target
PrivateCo.
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- Diligence of CPC shell limited given CPC has no operating
business (and limited litigation risk).
- Fulsome diligence must be completed by CPC on target
PrivateCo.
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- Fulsome diligence must be conducted on both the PrivateCo and
the RTO issuer.
- PrivateCo will need to consider any existing RTO issuer
liabilities, including litigation.
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Director, Management
and Employee
Matters
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- Success of the going public transaction is partly dependent on
the creation of market goodwill (which is typically enhanced by the
involvement of directors/senior management with capital market
experience and industry experts).
- Directors and management of the new or resulting issuer are
subject to review and approval by applicable securities commissions
and exchanges (and each new director/senior management must file a
"personal information form".
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- Management and employee teams stay consistent following the
IPO.
- PrivateCo may need to add additional members with experience in
public companies to their boards and management teams to comply
with applicable securities laws and exchange requirements.
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- Management of the resulting issuer is primarily comprised of
PrivateCo management but may include experienced management from
the SPAC.
- Ability to expand/ diversify PrivateCo's management by
involving sponsors in management of the business.
- SPAC sponsors often represented on board of resulting
issuer.
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- Management of the resulting issuer is primarily comprised of
PrivateCo management but may include experienced management from
the CPC.
- Ability to expand/ diversify PrivateCo's management by
involving sponsors in management of the business.
- CPC founders often represented on board of resulting
issuer.
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- Management of the resulting issuer is primarily comprised of
PrivateCo but may include experienced management from the RTO
issuer.
- PrivateCo may need to add additional members with experience in
public companies to their boards and management teams to comply
with applicable securities laws and exchange requirements.
- Special consideration must be given to treatment of legacy
employees of RTO issuer (i.e.,termination issues), and transition
of legacy personnel to new board and management.
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Other
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- Non-Canadian PrivateCos may have supplemental requirements
imposed upon them in going public transactions by the applicable
stock exchange.
- PrivateCos that have their principal business or operating
assets in emerging markets will need to comply with additional
securities laws disclosure requirements and may also be subject to
additional stock exchange requirements.
- PrivateCos that have material assets in other jurisdictions may
be subject to additional due diligence.
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