Private companies considering going public are often dissuaded by the size requirements, cost, and regulatory hurdles involved with listing on the New York Stock Exchange (NYSE) or NASDAQ. The Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) offer an opportunity for a private company not otherwise able to go public in a U.S. stock exchange to avail itself of the advantages of being traded on a public exchange without as many of the hurdles and challenges presented by going public in the U.S. There are four primary methods of going public on the TSX or TSXV: (a) an initial public offering (IPO) on the TSX or TSXV; (b) a reverse take-over of an existing TSX or TSXV listed issuer; (c) a qualifying transaction with a capital pool company (CPC) listed on the TSXV; or (d) an application for a direct listing of its securities on the TSX or TSXV (if the issuer is already listed on a stock exchange elsewhere in the world).
The requirements for listing on the TSX and TSXV are industry sector and size (development-stage) specific. As a general rule, more mature operating companies seek listing on the TSX while more early stage and tech driven companies seek listing on the TSXV. Private companies seeking to be listed on the TSX or the TSXV must demonstrate their ability to satisfy all of their reporting and public issuer obligations in Canada.
There are a number of advantages to being publicly listed (some described below), and the lower barrier to entry make the TSX and TSXV, potentially attractive options for domestic private companies.
Once a company goes public, there is inevitably a certain level of publicity and awareness relating to the company that has the effect of bolstering the company’s business prospects, brand recognition, and potential ability to recruit high quality employees.
Once a company goes public, additional financings can be larger and made more quickly than conducting private securities offerings or seeking bank financing due to the ability of a public company to issue its securities on the public market to a much broader market. Even with regulatory requirements related to any issuance, the speed and ease of a public issuance can be very attractive.
In addition to the company’s ability to sell shares in the public market, existing shareholders, including executives, employees, founders, and early investors can achieve liquidity with respect to their ownership because of the active public market for their shares.
Listing information for the TSX and TSXV can be found at https://www.tsx.com/listings/listing-with-us/listing-guides/faq. As private companies consider access to the capital markets, there is an option offered by the TSX and TSXV worth consideration.