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RTO, Is It Right For Me?

by ITB Solutions

Contrary to widely held opinion, going public by means of a reverse takeover of an existing reporting issuer (or “shell” company) is the most common avenue for accessing the capital markets today – significantly ahead of the Initial Public Offering (IPO) route.

There are several reasons for this. Not least of them is the fact that it is frequently easier and faster to find an appropriate shell and negotiate a merger than it is to find a willing investment dealer to sponsor the initial Public Offering.

First Principles

A reverse takeover (“RTO”), or reverse merger as it is sometimes known, is a process whereby a private company merges with a reporting issuer (a public company that reports to a provincial securities commission in Canada) and inherits the shareholder base of the reporting issuer.

The definition of a reporting issuer is a company that has been filing quarterly and annual financial statements, as well as certain other material filings, with one or more of the Provincial Securities Commissions in Canada. The reporting issuer may be listed on a stock exchange (as is likely) but this is not a requirement of a reporting issuer shell.

Types of Shells

Shells come in all shapes and sizes. Some have cash in them and some do not. What they have in common is that they are generally dormant companies that are interested in speaking with promising vend-ins by private companies. There are many sources of excellent shell companies in Canada. Many good shells are not even listed on a stock exchange, but have dutifully reported to the regulatory authorities, are up to date, and are excellent candidates for reverse takeovers. Other exchange-listed companies that have become dormant and are looking for a reverse takeover opportunity may be listed on one of the fully recognized stock exchanges in Canada such as CSE.

What Shell is Right for My Company?

This is the right question to ask! After all, you will be inheriting a group of shareholders that you hope will understand the sector you operate in and your company’s particular value proposition. If they do understand your value they will be more likely to not only hold on to their shares, but invest again in your company including short term raises that could help you finance your professional costs toward a completion of the deal. If they don’t understand that value, it could spell difficulties in the future.

Okay, So What Are My Next Steps?

Shell sourcing is not easy. It can be time consuming if not done properly. ITB Solutions has spent years in getting that right, and we can save you a lot of time and expense. ITB has developed a proprietary shell sourcing program that is efficient and cost-effective. We connect you with a shareholder base that is familiar with your space and that “gets” your particular value proposition. This represents a fit with key shareholders that will stand by you once you are public and will be there for you when you are ready to raise capital by means of a share offering or private placement. In addition, ITB assists in connecting you with after-market support and guides you all the way to a successful public listing.

Please feel free to contact ITB for a quick and confidential conversation on your options at one of the following coordinates:

LEARN MORE ABOUT REVERSE TAKE OVERS

Peter Traynor

647-500-0493

peter@itbsolutions.ca

or

Jeffrey Stanger

647-500-0492

jeffrey@itbsolutions.ca