MANY of our clients come to us wanting to know how best to tap into particular overseas capital markets. The commercial drivers are varied, but the desire to lock into foreign markets often evolves from the development of a relationship with a cornerstone investor.
Frequently, this will determine the market of interest. As an example, a client with a major Chinese shareholder is likely to benefit from a listing on the Hong Kong market, to better facilitate further equity investments with its Chinese partner.
There are also global hot-spots which draw significant interest for certain types of investment opportunities. The London Stock Exchange and Alternative Investment Market are known to attract to resources companies with African projects, while The Toronto Stock Exchange (TSX) is a best seller where resource companies are concerned and anecdotal evidence shows that Canadian investors have an appetite for Central and Southern American projects.
Listing on a foreign market can be challenging and understanding the process, the costs and the investment culture are all equally important. The Canadian TMX Group Inc. owns and operates the third largest equities markets in North America. Two of its largest markets are the TSX (the senior market for well established equities) and the TSX Venture Exchange (TSX-V) (a public venture capital marketplace for emerging growth companies).
Australian companies can apply for a listing on either market, but the TSX-V is the primary market for small, high potential, growth companies including explorers and new high tech ventures wanting to get a foothold into the Canadian marketplace. The key advantage of a TSX-V listing is the ability to gain entry to the Toronto market, gain exposure to investors and build awareness in your brand, without having to meet the stringent requirements of the TSX.
The requirements for listing on the TSX-V are not dissimilar from Australian requirements and include:
1. Spread – 200 public holders. Holders need not be Canadian, however building a shareholder base in North America and developing a plan to establish liquidity is strongly recommended.
2. Financial Tests – Requirements vary depending on industry and company type. Financial tests can include Net Tangible Assets, Earnings and Revenue. (Explorer’s require only $2m NTA). There are minimum working capital and property holding requirements.
3. Board – A minimum of 2 independent directors, designated CEO, CFO and Secretary roles and a board with experience in public markets and relevant industry are required. Directors and management need not be resident in Canada, but Canadian market experience is preferred.
4. Auditor and Accounts – A Canadian registered auditor is required. Accounts are to be prepared to IFRS standards.
5. Disclosure – Prospectus style disclosure is required if a public offering is also conducted, but otherwise may not be required (depending upon the regulatory framework in the home market, length and continuity of trading history and business activities).
6. Exemptions from Continuous Disclosure Obligations and TSX-V Rules – Certain continuous disclosure exemptions are available to Australian issuers that have less than 10 per cent ownership in Canada. Further, the TSX-V will not apply certain of its ongoing listing rules to issuers listed on another exchange where 75 per cent of their trading value and volume occurs in the previous 6 months.
7. Technical Reports – Mining, oil and gas companies need to prepare technical reports complying with Canadian reporting requirements. For miners, JORC disclosure is sufficient (provided any material differences with Canadian standards are addressed).
However, ticking off the TSX-V requirements will not guarantee success of your company. From past experience, having a Canadian representative championing your cause will go a long way towards gaining the trust and interest of Canadian investors.
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