How Do I Take My Company Public
How do I take my company public?
Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, provides insights on the going public process.
Ensuring you as CEO or CFO know what to expect when planning to go public with your company brings a sense of control, calm and non-emotional decision making. Very often CEOs and boards find themselves at the forks in the road or backed into a corner having to make fundamental decisions that create a domino effect for the direction and relationships their company is heading into.
How do I go public?
For the most part, there are two primary ways to go public in Canada, and they include:
- Initial Public Offering: known as the IPO process, this involves selling your shares on a Stock Exchange to the public; and
- Reverse Take Over: known as an RTO this involves a merger of a private and public company – the public company can purchase the shares of a private company and pay for the shares with its own shares, and as part of the transaction the management and board of the private company become the management and board of the re-energized public company.
There are other methods to take your company public like completing a qualifying transaction with a Capital Pool Company, completing a three-cornered amalgamation with a subsidiary of a public company, and doing a “soft listing” on an exchange from reporting issuer to listed issuer (if you qualify). These are considered hybrids of the RTO process.
What does it take to go public with your company?
How long does it take to go public?
In typical lawyer language, the straight answer is “it depends”. An IPO can be completed in a rush basis over 3-4 months, and I have heard of some happening as quickly as 1 month – but those are the exception, not the rule. An RTO or hybrid of an RTO will take approximately 3 to 4 months to complete at the earliest.
Choosing the IPO process typically takes a lot longer than the RTO process as it involves building the business through various stages of “value creation”, and allows boards and management to raise money and add value. The funding cycle from start to IPO usually takes 3 to 5 years to complete and is an intense experience filled with emotional wins and losses, personal growth and reaching new levels in achievement.
The IPO process usually involves distinct investment patterns that help determine what stage a company is at relative to a future liquidity event and include:
- founders and seed financing
- angel and sophisticated investor financing
- institutional financings
- public offering
What is the best way to go public – RTO or IPO?
Management and an involved board of directors make decisions on how to go public and usually base those decisions on any prevailing priorities as identified in a business plan for the company. Depending on the strength of your management team, your product or service, and your plan forward the decision will become more clear. Also, stock exchanges will require legal “tests” be met in order to list publicly with them, these include revenue tests, asset tests, resource results test, mineral results tests etc… .
If your are planning to go public in Canada you should ensure you know two things:
- What exchange is preferred ie. TSX, TSX-V, CSE or others?
- What is the test or what do we need to qualify to go public via IPO or to stay public via RTO?
Ask your lawyer, your CFO or call/email any exchange and ask for resources to help you learn and prepare to make these decisions.
Should you wish to discuss your business’ stage and path to go public further please do not hesitate to contact me directly via phone or email.