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IPO Consulting

Becoming a publicly traded company represents a significant achievement for any organization. But while it has many strategic advantages which can accelerate your company’s growth, the process can be quite complicated, time consuming and risky. Before you jump in, it’s important to get professional advice. Here is a synopsis of important factors to consider.

Some of the benefits include

  • Access to capital markets and the ability to achieve long-term business goals
  • Shareholder liquidity
  • Wealth creation
  • Greater exposure of the business to customers and suppliers

Challenges of an IPO process

However, the IPO process also has its challenges. As a public company, there is increased disclosure of material contracts and executive compensation, which would also be available to competitors. There is also an increasing report on requirements, such as preparing:

  • Annual and quarterly financial statements
  • Management discussion and analysis
  • Annual information forms
  • CEO/CFO certifications on internal controls over financial reporting

Other potential disadvantages include

Before going public, there are a number of strategic and operational issues to consider

  • Increasing in corporate income taxes (companies may lose certain tax benefits - i.e. small business deductions)
  • Ownership dilutions
  • Direct costs associated with being a public company

Other factors to consider before going public

1. Status of the company

A requirement of going public is to prepare and file a prospectus. A prospectus is a public offering document, which is intended to ensure that potential investors receive balanced and accurate disclosure related to the securities issued. It assists of underwriters in evaluating the level of interest in the securities being offered. It is used by potential investors as well as underwriters to assess the financial strength and the position of the company. Another key objective of the prospectus is to create excitement about the company which will maximize the number of shares issued to private and institutional investors. The form and content of the prospectus is governed by National Instrument 41-101, General Prospectus Requirements, including Form 41-101F1. Before the prospectus is released, it must be approved by the provincial securities commissions. Some of the required disclosures are:
o An overview of the business, markets, products and services
o The strategic direction of the company
o The use of the funds raised through the IPO process
o The business risks
Since the prospectus must also include three years of audited financial statements, it is important to have systems and processes in place. Our goal is to publish your company’s story by guiding you through the entire IPO process.

2. Timing and market conditions

Securities offered for sale will be largely influenced by economic and market factors such as stock market levels, interest rates and inflation. Our objective is to achieve a balanced price for your company’s stock to create investor confidence.

3. Management team and corporate governance

A key component of going public is having the right management team in place to help promote your company. It is important to have a team that is experienced to execute a strategic plan with compliance to meet all your company’s requirements. However, you will be required to assemble a board of directors. The board will be responsible for corporate governance and can play a vital role in the IPO process, leveraging their knowledge and experience.

4. Infrastructure and business processes

Public companies are required by securities legislation to meet continuous reporting requirements. These requirements will include:
o The annual information form, which must be filed annually within 90 days of the companies’ fiscal year end (TSX-V issuers are exempt from this requirement)
o An annual audited and quarterly financial statements that must be filed within 90 days of year end and 45 days after quarter end (120 and 60 days, respectively, for TSX-V filers)
o Management’s discussion and analysis
o An Information circular
o Disclosure of material change reports
o Business acquisition reports
o CEO/CFO certifications over establishing and maintaining disclosure controls
o Procedures and internal controls over financial reporting

5. Cost

There are significant costs when going and becoming public. Typical Underwriter commissions for marketing ranges from 6 to 10% (based on the size of the offering). Other costs would include legal fees for preparing/reviewing documents, audit and accounting services, marketing, printing, securities commissions’ filing fees and listing fees.

How We Can Help

At Wealth Solutions Financial, we assisted a number of companies through IPO process. We can discuss whether going public is the right decision for you and your company. Our experienced professionals will work closely with you to ensure you remain well informed and are prepared at every stage. To find out more about what we can do for you, please contact us.

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