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Planning on Going Public? - Prepare for Success

When raising capital and going public ensure that you are ready.

By Jeffrey Stanger, ITB Solutions

Introduction

Going Public is a life changing decision and journey that can be smooth or rocky, it all depends on how well you prepare. There are many advantages to going public: prestige, growth, competitive advantage, more options for acquisition of assets, companies and talent, employee recruitment and retention and succession planning.

Before going down the road of going public, conduct a checklist to see if you are prepared - this can be done with advisors and/or consultants who are experts in the process.

We will look over the issues that should be considered before going down of the path of going public.

Corporate Issues

This covers your company’s structure and issues that you should deal with before making a deal to go public through an Initial Public Offering or a Reverse Take Over. Some are as follows:

1. Share Structure - What is the current share structure - has it been structured for a going public transaction or are there 10, 50, 100 shares issued?

2. Articles of Incorporation - Do they allow a going public transaction? Do they allow a financing at any price, any form and any amount? Do the articles reflect that the company has an unlimited authorized amount of shares to be issued?

3. Minute Book - Have the minute books been kept up to date?

4. Board of Directors - Does the company have a board of directors? Are there directors with experience in your industry? Do any of the directors have public company experience whether being a director or part of the senior management team of a public company?

Your securities lawyer can help you rectify any deficiencies with the above.

Business Issues

On the Business Issues, some of them overlap with the Corporate Issues. What you need to consider are the following:

1. Business Plan – Does the company have a completed business plan? There are two important reasons for this, one is that much of the business plan will be used for the prospectus level disclosure document for the going public transaction; two, it shows investors that you have gone through the process of building a business plan, essentially telling them you have looked at all the opportunities and potential pitfalls in the building of the business.

2. Debt - Does the company have any debt, is it long-term or short-term? Is it owed to a shareholder, director or management of the company? The reason for this is that investors are not looking to invest money to pay off someone else’s debt. How can this be mitigated if there is debt? One answer is to make it a long-term debt with conditions or to have the creditor convert it into shares.

3. Previous Financings - Has the company done a financing recently? What valuation was it at? Many times companies do a financing with people close to them at a higher level than public company investors will invest at.

4. Financials - What is the status of the financials? Do you have audited financials? Financial review engagements? Management prepared statements? If you are a new company and don’t have any financials, then keep your records in good standing. It will lower your costs for your going public audit. Use a bookkeeper or one of the many accounting software or SAAS systems out there such as Wave Accounting.

Pre- Public Strategy

Your pre-public strategy should be laid out. This strategy should be detailed but also fluid as the capital markets will dictate the path you go down. Are you going public through an IPO or RTO? Maybe the investors will want you to stay private for 18, 24, 36 months, etc.

There are many strategies for a successful going public initiative and you should consult with experts in this field that know these strategies and what is successful or not.

Post-Public Strategy

This should be thought of before you are publicly traded. You need to decide how you are going to get your company and its opportunity out in the market. There are over 500,000 different investment vehicles in North America and you must compete for those investment dollars. To do this you must be prepared to provide information to the investment community through your website, press releases, Investor Relations team and program as well as appropriate advertising. Make sure someone with the company or IR team is always available to take investors’ calls.

Since you’ve structured your company properly for your going public transaction you will have the appropriate share structure for going forward. Your share structure will not have too large or too small of a float, just a balanced float. Many times companies work to have almost no float in their share structure which leads to very little or even no trading/liquidity. Most successful investors weight liquidity over share price when buying shares. With the right structure it could be appropriate to have one or more market makers on your stock. Remember that market makers are there to make a market, not create it.

Conclusion

You probably have heard about some good experiences and many bad experiences of going public. Most of the reasons for bad experiences is that the company was not prepared and decided to try it through the DIY (Do-It-Yourself) method. Don’t fall into that trap - there are approximately 4,000 public companies in Canada that completed a going public transaction usually with a capital raise.

If you want to be one of the good stories, then be sure to hire experts who can see you through to the end and ongoing.

ITB Solutions is devoted to assisting private companies with accessing the capital markets in Canada. ITB Solutions brings a full range of services that empowers businesses, whether public or private, to achieve all of their milestones required to access financing and if desired become public. Since 2005, ITB Solutions has provided listings development services to the Canadian Securities Exchange. CSE is the first new stock exchange approved in Canada by securities commissions in over 70 years and has also been designated by the Federal Department of Finance as an eligible stock exchange for RRSPs and TFSAs. We assist companies with the listing application and managing the process to become publicly tradable on CSE, as well as offering advice on how to make the most of your public listing. We also assist the exchange in marketing to potential public companies worldwide. You can reach Jeffrey Stanger at 647-500-0492 or by email at jeffrey@itbsolutions.ca

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