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By selling its shares to the public, a private company becomes a publicly traded one. Its first entry into the public market is with an initial public offering of its shares. This step marks a major step in the evolution of the business. The primary benefit is financial and enables a company to add a new way to finance its growth.

By selling its shares to the public, a private company becomes a publicly traded one. Its first entry into the public market is with an initial public offering of its shares. This step marks a major step in the evolution of the business. The primary benefit is financial and enables a company to add a new way to finance its growth.

By going public an enterprise enters a different dimension for company finance. However, becoming a public company is not without its associated costs. An IPO is only a good option for a company with a tolerance for the risks involved. There is a high failure rate for those with proceeds of less than 1 million dollars, even in the more open Toronto Venture Exchange, is a significant drawback for early stage start ups. The risk of underpriced shares that denies market value is a possibility. The process costs can be daunting. The costs include the regulatory requirement costs, the cost of preparation of the offering prospectus, payment of fees and paying professionals employed to assist in the preparations for offering. There can be unwelcome pressure to focus on short-term results in order to meet investor demands for a return on their capital, that can short change long-term strategic growth imperatives. Hence, businesses need to seriously consider whether the benefits outweigh the risks for them.

Professional advisors must be brought on board to manage this step. They will also aid owners of the business weigh the decision carefully. These advisors will help to develop strategy for this undertaking. The goal will be to make the sale under the best market conditions. This whole process that marks a a new era in company finance will take just about a period of over 3 months.

With the challenging IPO marketing conditions in the United States, American companies are seeking foreign alternatives. The proximity of Canada, the strength of the Canadian economy and sound stock exchanges, make the decision of a Canadian public offering increasingly common for certain companies. In Canada, the Toronto TSX and TSX Venture Exchange are dominant. The Venture exchange is a draw for the smaller budding companies. These exchanges also impose less burdensome requirements on companies than American counterparts. The Canadian market is also more friendly to trading of smaller company shares.

The Process of Going Public in Canada

Once management makes the decision to take the business public, a lawyer specializing in securities law must be retained. The lawyer helps management to organize the business in compliance with the applicable policies, regulations and statutes. The lawyer prepares a prospectus based on information provided by the company and its advisors. The prospectus is a detailed document about the enterprise. It provides information sufficient to inform investor decisions concerning purchase of the securities offered. The prospectus must describe the enterprise and its holdings, its capitalization and future plans, including how proceeds from the share sale will be spent. It is required that it provide complete and truthful disclosure of all materials facts and comply with the relevant laws and policies.

After the prospectus is drafted, it is then filed along with any supporting documents with a provincial securities regulator. Upon the filing the regulator will provide a receipt of filing. This receipt permits the company to now approach its potential investors to gauge the market friendliness for the issue. Upon its review of filed documentation, the provincial regulator provides comments on the filed documentation. Thereafter, a final filing is made which incorporates new information to the initially filed prospectus and its supporting documents. A receipt is provided after this filing as well and marks the end of one procedural stage.

Once in possession of the final filing receipt, the company can start selling its shares and list with a stock exchange. The share sale is managed by agents or underwriters of the securities. The agents or underwriters will be compensated with discount on share price, an option to purchase shares at a future time, by payment of commission, or a combination thereof. The public company is thereafter responsible for maintaining the accuracy of its public record. This entails keeping investors up to date and making necessary filings of its reporting material with provincial regulators, the company registrar and stock exchanges which list the company stock.

Listing on Canadian Stock Exchanges

Once the final receipt is received from the securities commission, an application can be made for listing on the stock exchange. The listing requires meeting the exchange listing requirements. This will require knowledge of the laws, policies, rules and bylaws that apply. Professional advisors will help in this process.

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