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Canadian Securities Course VO1 > Chapter 12: Financing and Listing Securities > Flashcards

Chapter 12: Financing and Listing Securities Flashcards

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SIE Exam flashcards
1
Q

What is underwriting?

A

It is the financing process that government and corporations need to go through to raise capital.

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2
Q

How does the government often do underwriting?

A

Through an auction process and occasionally through a fiscal agency.

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3
Q

What are the two main group in finance department?

A
  1. Government finance

2. Corporate

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4
Q

What does the government finance department specialize in?

A
  • selling debt instruments to institutions and other interested parties.
  • also advises both clients and the issuing governments on debt issues.
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5
Q

What does the person that is in charged with the responsibility of government finance must do?

A

Be in touch with the market all the times to ensure awareness of market conditions and prices.

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6
Q

Which issues that the finance department give advice to government in issuing?

A
  1. The size (value), coupon (i), and currency
  2. timing of the issue
  3. should be domestic or foreign
  4. what effect the issue may have on the market
  5. Whether the issue should be a new maturity, or whether a previous issue should be reopened
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7
Q

What should the corporate finance department be careful to keep balance?

A
  1. between the needs of the corporate clients with the needs of the investing public.
  2. Current market conditions (both debt and equity) with the limitations of the company financial position and future prospects.
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8
Q

What skills should the employees in corporate finance department have?

A

Skills in market timing, technical knowledge of legal and financial matters, and a thorough understanding of financial analysis and promotion.

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9
Q

What are the issues that corporate finance department should notice?

A
  1. Type of securities
  2. Timing to market
  3. Private or public offering
  4. Proportion directed to institutional and retail investors
  5. Pricing
  6. Coupon rate or valuation multiple (like P/E ratio)
  7. Underwriting fee.
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10
Q

How does the Canadian Government issues new fixed-coupon marketable bonds and Treasury bills to the market?

A
  • regularly through competitive tender system by way of an auction, whereby the amount won at the auction is based on the bids submitted.
  • Bids can also be submitted on a non-competitive tender basis, whereby the bid is accepted in full by the Bank of Canada and bonds are awarded at the auction average yield.
    (they can be together in a same auction, non-compatitive get priority)
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11
Q

Who can submit bid to Bank of Canada for Canadian Government new issue?

A

Only institutions recognized as government securities distributors. They may submit bids for their own accounts and on behalf of their customers. (Schedule I and Schedule II banks, investment dealers, and foreign dealers active in the distribution of government securities)

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12
Q

When a government securities distributor is called primary dealer?

A

when it maintain a certain threshold of activity.

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13
Q

Why the Government have to holds regularly scheduled quarterly auctions for bonds?

A

To maintain regularity and transparency in its debt operations.

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14
Q

How often the Government holds auctions for benchmark bonds of 2, 5, and 10 years?

A

Quarterly auction

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15
Q

How often the Government holds auctions for benchmark bonds 30 years?

A

semi-annual auction

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16
Q

What are the available denominations of Government bond?

A

$1,000, $5,000, $100,000, and $1 million

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17
Q

What is the direct bond issued under provincial and municipal issue?

A

Bonds are issued in the government’s name

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18
Q

What is the guaranteed bond issued under provincial and municipal issue?

A

Guaranteed bonds are issued in the name of a crown corporation, with repayment guaranteed by the provincial government.

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19
Q

What is the guaranteed bond issued under provincial and municipal issue?

A

Bonds are issued in the name of a crown corporation, with repayment guaranteed by the provincial government.

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20
Q

How provincial and municipal issue are sold?

A

are usually sold at a negotiated price through a fiscal agent.

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21
Q

What is a syndicate in provincial and municipal issue?

A
  • Under the provincial method, a provincial government appoints a group of investment dealers and banks, called a syndicate, to underwrite issues, offer advice, and manage the process of issuing securities.
  • The syndicate usually includes many major dealers, whose combined financial responsibility and distribution powers.
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22
Q

Who are the investors of provincial and municipal issue?

A

institutional portfolios and pension accounts.

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23
Q

What are the requirements of dealers in provincial and municipal issue?

A

These issues require in-depth knowledge of the tax-generating potential of the local municipal area. The dealer must also understand the industrial base and other demographic information.

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24
Q

How does Canadian corporate financing usually occurs?

A
  • By negotiated offering.
  • With this method, a corporation’s management negotiates with a dealer to determine the type of security, price, interest, or valuation multiple, as well as any special features and protective provisions that may be needed to ensure the success of the new issue.
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25
Q

What is the company’s share capital?

A

Formed by both common shares and preferred shares

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26
Q

What is Authorized shares?

A
  • Are the maximum number of shares (either common or preferred) that a corporation may issue under the terms of its charter.
  • A company may have more shares authorized than it has issued to shareholders. (so it can issuing more shares in the future).
  • A corporation may also amend its charter to increase or decrease the number of authorized shares.
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27
Q

What is issued share?

A
  • Is the portion of authorized shares that the corporation has issued, either to the investing public, to company insiders, or to large institutional investors such as a mutual fund.
  • Collectively, these shares owned by all shareholders are called outstanding shares.
    (ex: a company issued 5 mil shares but bought back 1 mil. Issued shares are 5 mil, outstanding shares are 4 mil)
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28
Q

Where in the company’s statement that provide information about the number of issued shares and outstanding shares?

A

In the capital stock section of the statement of changes in equity

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29
Q

What is market capitalization of a corporation?

A

Is a company’s outstanding shares. Therefore, the total dollar value of the company is based on the current market price of its issued shares that are currently outstanding.

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30
Q

What is public float in company’s share?

A

Is the portion of outstanding shares that are freely available for public trading (exclude shares held by insiders and institutions with a controlling interest in the company)

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31
Q

How can the amount of public float affect the share’s price?

A
  • Small public float would have more volatile in price because large buy or sell orders on market will have a more dramatic effect on the price.
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32
Q

What are the main types of long-term debt securities in corporation finance?

A
  1. Mortgage bonds

2. debentures

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33
Q

What are the options of a corporation in financing?

A

stock, bond, bank loans, money market borrowing, commercial paper, bankers’ acceptances, leasing, government grants, and export financing assistance.

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34
Q

What are the issues that dealers will help a corporation when undertake financing?

A
  • providing advisory services on timing, amount, and pricing, distribution, after-issue market support, and after-issue market information support.
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35
Q

What does the dealer prepares when negotiating new issue for a corprate?

A

Due diligence report

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36
Q

What is due diligence report?

A

The study includes the corporation’s position in the industry, financial record, financial structure, and future prospects, risk factors associated with the industry and the company.

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37
Q

While preparing due diligence report, who might participate in other than the dealer?

A

Various experts in the appropriate field may be consulted.

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38
Q

Are the relationship between dealer with corporations only principal or agent?

A

No, corporation can relies on dealer’s advice and guidance so they can develop a professional relationship like lawyer and client -> broker of record

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39
Q

When does the dealer become broker of record of issuing corporation?

A

Once the relationship between them is solidified (rắn chắc) and the dealer has the right of first refusal on new financing planned by the corporation.

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40
Q

what do the corporation need to make sure before issuing new security?

A

they need to ensure the new securities are consistent with the firm’s capitalisation, not limit the future decision-making flexibility.

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41
Q

What is the advantage of bond?

A
  • lower interest rate

- marketable to institutions that require debt issues secured by assets

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42
Q

What is the disadvantage of bond?

A
  • less flexible because the assets are pledged to a trustee
  • Problems in mergers and amalgamations because of pledges against specific assets.
  • The omission of which can lead to default.
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43
Q

What is the advantage of debentures?

A
  • flexible because there are no specific pledges or liens.

- The cost at issue is lower because there is no registration of assets.

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44
Q

What is the disadvantage of debentures?

A
  • The coupon rate can be higher than a comparable bond.

- The omission of which can lead to default

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45
Q

What is the advantage of preferred shares?

A
  • the company can increase debt outstanding and still maintain a stable debt-to-equity ratio.
  • The omission of a dividend payment does not trigger default.
  • greater flexibility because of the lack of pledge of assets.
  • Limited lifespan because they can be redeemed through the open market, lottery, or purchase fund
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46
Q

What is the disadvantage of preferred shares?

A
  • The cost of issuing preferred shares is high because the dividends are paid with after-tax income.
  • Occasionally, can trigger the implementation of voting privileges for preferred shareholders.
  • A purchase fund can be a drain on company assets during recessionary times.
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47
Q

What is the advantage of common shares?

A
  • no obligation to pay dividends.
  • No repayment of capital is required.
  • The larger equity base can support more debt.
  • The market value of the company can be established for estate purposes, mergers, or takeovers.
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48
Q

What is the disadvantage of common shares?

A
  • Equity is diluted for existing shareholders upon the issuance of additional shares.
  • Dividends, if paid, are more expensive than interest because they are paid with after-tax dollars.
  • A higher underwriting discount than on a debt issue is charged.
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49
Q

When issuing bond, what does the dealer advice to the corporation?

A

interest rate, the redemption process, and refunding provisions, and various protective clauses (or

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50
Q

What are the protective clauses?

A

protective provisions, trust deed restrictions, or covenants (giao ước)

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51
Q

Where do they put the protective clauses when issuing bond?

A

in a legal document called the trust deed ( In the case of a mortgage bond called deed of trust and mortgage; in case of a debenture, called trust indenture)

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52
Q

What is the protective clause for?

A
  • These clauses are essentially safeguards placed in the issue’s contract with the purchaser to guard against any further weakening in the position of the security holder
  • Make an issue more appealing to investors (especially if a company in a weak financial condition, they need to make them more stringent and restrictive to float a new issue, unlike a company with greater financial strength).
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53
Q

What are the different form of distribution in corporate financing?

A
  1. private placement
  2. primary offering (= initial public offering IPO)
  3. secondary offering.
54
Q

What is the private placement in corporate financing?

A
  • the entire issue is sold to one or several large institutional investors such as banks, mutual fund companies, insurance companies, or pension funds.
55
Q

Why in private placement of corporate financing, they don’t need the requirements for detailed disclosure, public notice, and the prospectus?

A

Because they sell to sophisticated investors and institutional clients. Without all of that, the cost of distribution is dramatically reduced.

56
Q

When do they usually announced the private placement of corporate financing?

A

often after they have occurred by advertisements in financial press.

57
Q

When doing public offering, why do the dealer and corporate need to come to a preliminary agreement?

A

to determine if the dealer will act as an agent or as a principal.

58
Q

What are the different options for public offering in corporate financing?

A
  1. Best efforts

2. Firm commitment (bought deal)

59
Q

What is best efforts in underwriting agreement?

A
  • The dealer acts as an agent and make its best efforts to sell the securities to the public. The rest will be returned to issuer.
60
Q

What is the disadvantage of best offer in underwriting agreement?

A

The issuer faces the risk of not raising the capital that it had intended.

61
Q

What is firm commitment in underwriting agreement?

A
  • The underwriter acts as a principal and commits to buy a specified number of securities at a set price, which it then resells to the public. (the underwriter pays the full proceeds to the issuer regardless how much can they resell)
  • The firm commitment can be initiated either by the issuing corporation or by the dealer member syndicate.
62
Q

How is the risk of reselling securities in firm commitment to dealers?

A

Presumably, on the basis of having performed due diligence, the underwriter perceives the risk to be low

63
Q

In which stages of negotiation, the two parties establish the dealer’s commission (if act as agent) or the spread between the proposed offering price and the dealer’s cost price (if act as principal)?

A

In the early stages of negotiation

64
Q

In corporate finance, when will the offering price and various other details are finalized?

A

Not until just before the public offering date (because price and volume are dependent on the market condition at the issue date)

65
Q

What is treasury shares?

A

Outstanding Shares that the company repurchases and do not have voting rights or dividend entitlements. (the company can sell them back again and the voting right and dividend entitlements of those shares are restored)

66
Q

What is secondary offering?

A

refers to previously issued stock being sold by shareholders, who are usually in a control position.

67
Q

Who will handle the secondary offering?

A

usually by an investment dealer or syndicate.

68
Q

When a firm commitment agreement to issue bonds, who does it often involves?

A

various different groups such as financing group, banking group, selling group, casual dealers, special group, exempt list.

69
Q

What is financing group When a firm commitment agreement to issue bonds?

A

is the lead underwriter (managing underwriter or syndicate manager). The issuing company sells bonds to a financing group and then bonds are offered for public resale at the par value price 100.

70
Q

What does the financing group do for the issuing company?

A
  • make recommendations on type, size and timing.
  • Advise on covenants or protective clauses, currency and pricing.
  • Prepare prospectus and trust deed, clearing issue with securities commissions, provision of documents.
  • The group accepts the liability of the issue on behalf of all its members
71
Q

What is banking group When a firm commitment agreement to issue bonds?

A
  • include additional dealers who agreed to participate
72
Q

What is the selling group When a firm commitment agreement to issue bonds?

A

include other dealers who are not members of banking group

73
Q

What is casual dealers When a firm commitment agreement to issue bonds?

A

include broker dealers, foreign dealers or bank that is not in banking and selling group

74
Q

What is special group When a firm commitment agreement to issue bonds?

A

May occur under various circumstances.

75
Q

What is exempt list When a firm commitment agreement to issue bonds?

A

includes only large professional buyers, mostly financial institutions that are exempt from prospectus requirements.

76
Q

What is a prospectus?

A

investment contract between the investor and the corporation issuing securities for sale.

77
Q

When do they require a prospectus?

A

when securities are deemed to be a distribution to the public

  • trades by or on behalf of an issuer
  • except in QC, trades from a control position, unless the trade is made under a prospectus exemption
  • Trades in securities previously acquired by way of a prospectus exemption, unless the subsequent trade is made under a further prospectus exemption.
78
Q

What is the prospectus for?

A

to provide full, true, and plain disclosure regarding the material facts about the security. Investors base on it to evaluate and make decision.

79
Q

Is that true that new issues is IPO?

A

NO, could be additional raising of capital from a reporting issuer (an already public company).

80
Q

When new issue from reporting issuer, is prospectus required?

A

yes, but less detailed than the one with IPO because the info about the issuer is already available to public

81
Q

What kind of prospectus that most provinces require (except QC)?

A

preliminary prospectus (red herring prospectus) and final prospectus.

82
Q

What is red herring prospectus (preliminary prospectus)?

A
  • Red cover prospectus has been filed but not final and subject to completion or amendment.
83
Q

Can the securities be sold or offers to buy be accepted after the preliminary prospectus?

A

No, only until the receipt for the final prospectus has been obtained from the provincial securities commission that leads the review of the prospectus.

84
Q

Is the preliminary always required when issuing new securities?

A

No (because it’s not required in QC but most province does). Required to be filed when selling to more than 1 province or when it is intended to solicit expression of interest.

85
Q

What is the purpose of the preliminary prospectus?

A

allow the distributor to determine the extent of public interest in the issue while it is being reviewed by the securities commission and before the actual pricing and distribution

86
Q

What are the requirements for the form and content of the preliminary prospectus?

A
  • Must comply with provincial legislation.
  • Must cover the form and content of the final prospectus (may exclude info about the price paid to the underwriter and offered price)
  • The auditor’s report may be excluded.
87
Q

What is greensheet?

A

It is information circular (for in-house only) which highlights the salient (quan trong) features of the new issue, both pro and con, to help sales representatives solicit (ga gam) interest from the general public.

88
Q

What is Multilateral Instrument (MI) 11-102 Passport System?

A
  • Give issuers streamlined access to the capital market in multiple jurisdictions (not adopted by Ontario).
89
Q

Under passport system, does the issuer need to file a prospectus in its principal jurisdiction and another prospectus in the system?

A

No, as long as the issuer file with its principal regulator, it will meet the requirements of one set of harmonized laws. The principal regulator issues a receipt and the issuer gives notice to the local jurisdictions. Upon receiving notice, other jurisdictions automatically issue a deemed receipt.

90
Q

Since Ontario did not adopt MI 11-102, so are they considered a principal regulator under the instrument?

A

yes, the issuers in ONtario can access to capital markets in other market by dealing only with Ontario Securities Commission for purpose of filing a prospectus or applying for a deemed exemption.

91
Q

Who must maintain the record of all persons and companies to whom a preliminary prospectus has been sent?

A

The underwriter, agent, or company distributing securities to the public.

92
Q

What will happen if the preliminary prospectus is determined by the securities commission to be defective or if an amendment or change is made?

A

A revised prospectus must be provided as soon as possible to each recipient of the first preliminary prospectus.

93
Q

What is waiting period?

A

the period between issuance of a receipt for a preliminary prospectus and final prospectus.

94
Q

What can the underwriters do during the waiting period?

A

They may solicit (gạ gẫm) expressions of interest from potential purchasers of the security. A copy of the preliminary prospectus must be provided to anyone who expresses interest, whether solicited or unsolicited.

95
Q

Can the underwriter encouraging a trade during the waiting period?

A

No. It is prohibited. Only advertising the proposed issue and inform the public of the waiting period, price, and the name and address of the dealer member.

96
Q

What has to be included in the final prospectus?

A
  • full, true, and plain disclosure of all material facts related to the securities.
  • must be accompanied by the written consent of experts whose reports or opinions are referred to in the prospectus and other documents. Such experts might include appraisers, auditors, and lawyers
97
Q

What are considered material facts?

A

Any information that can significantly affect the market price or value of the securities. This includes the offering price to the public, the proceeds to the issuer or selling security holders (or both), the underwriting discount, and any other required information that may have been omitted in the preliminary prospectus.

98
Q

What is call blue skyed?

A

The regulators review the documents carefully and may require changes before final approval. Once approval of the final prospectus is granted, the issue is then said to be blue skyed and may be distributed to the investing public

99
Q

When do they have to mail and deliver to all purchasers or the purchaser’s agent the final prospectus?

A

No later than midnight on the second business day after entering an agreement of purchase and sale (therefore, they need to maintain the list of recipient of the preliminary prospectus)

100
Q

Specifically, what information needs to be in the prospectus?

A
  1. cover page disclosure (value offering, how stakeholder will be paid, preliminary or final prospectus)
  2. summary (highlight information)
  3. Information relating to the issuer
  4. Information relating to the securities
  5. Information relating to the officers and shareholders (name and address of directors and officers with 5 year histories of principal occupations and shares owned)
  6. Information relating to the parties involved
101
Q

What will be included in the part of information related to the parties involved in the prospectus?

A
  • contains a number of representations, declarations, and certificates from the parties who are involved in the issuance of a security. Includes two certificates:
    • A certificate stating that the information in the prospectus constitutes full, true, and plain disclosure of all material facts relating to the securities offered, signed by the issuer’s chief executive officer, the chief financial officer, two board directors, and any promoters
    • A certificate stating that the information in the prospectus constitutes full, true, and plain disclosure of all material facts relating to the securities offered by the prospectus, signed by the underwriters and made to the best of their knowledge, information, and belief
102
Q

What will be included in the part of the information related to the officers and shareholders?

A
  • Names and addresses of directors and officers with five-year histories of principal occupations and shares owned. It also includes:
    • Disclosure of specified information with respect to executive compensation and indebtedness of directors and senior officers to the issuer or its subsidiaries
    • Information regarding any bankruptcies, cease-trade orders, or securities regulatory violations
    • Details of any outstanding options, rights, or warrants to purchase securities of the issuer, of shares held in escrow (ký quỹ)
    • Details of any prior sales of the securities being offered.
103
Q

What will be included in the part of information related to the securities?

A

Securities information includes the type of product, use of proceeds, distribution method and eligibility of investment, as well as a description of the securities.

104
Q

What will be included in the part of information related to the issuer?

A

Issuer information includes the issuer’s name and business, selected financial information, capital structure, recent facts, and trends that could have a material impact on the business.

105
Q

What is a market out clause?

A
  • Clause permits the underwriter to cancel an offering without penalty under certain conditions.
106
Q

Where will the Market out clause is in the prospectus?

A
  • Must be disclosed on the cover page of the prospectus along with reference to the location of further details under the plan for distribution in the prospectus.
107
Q

What is short form prospectus?

A

focuses on matters relating primarily to the securities being distributed, such as price, distribution spread, use of proceeds, and the securities’ attributes (omits information that can be found in the issuer’s annual information form (AIF) and other continuous disclosure.

108
Q

Which province adopted short form prospectus and why?

A

All Canadian provinces and because they want to allow issuers quicker access to capital markets.
This shortens and streamlines the procedures.

109
Q

When does an issuer is permitted to use a short form prospectus?

A
  • It electronically files using the System for Electronic Document Analysis and Retrieval (SEDAR).
  • It is a reporting issuer in at least one Canadian jurisdiction (and relies on the Passport System, if it files in other jurisdictions).
  • It has filed current annual financial statements and a current AIF in at least one Canadian jurisdiction in which it is a reporting issuer.
  • It is not an issuer whose operations are ceased or whose principal asset is cash, cash equivalents, or exchange listing.
  • It has equity securities listed and posted for trading or quoted on a short form eligible exchange.
110
Q

When is a long form prospectus required?

A

for certian offerings including IPO, an offering by an inactive or dormant (ngủ đông) issuer, and an offering for the purpose of financing a material change in the issuer’s business

111
Q

What is after-market-stabilization?

A

Duty of the lead dealder for the new security. Have to support the offer price of stock once it begins trading in the secondary market (after-market).
This includes in the underwriting contract.

112
Q

What are the activities of after-market stabilization?

A
  1. Greenshoe option (or over-allotment option)
  2. Penalty bid
  3. Stabilizing bid
113
Q

What is the Greenshoe option (over-allotment option) when doing after-market stabilization?

A
  • Allows the dealer to issue 15% more shares than originally planned. If demand is high, the dealer exercises this option, allowing the dealer to leave additional shares in the market. In effect, the issuer raises more capital.
  • If demand is low, and the price of the stock drops, the dealer buys back the additional shares to cancel them, and the purchase of the shares puts upward pressure on the stock price.
114
Q

What is the penalty bid when doing after-market stabilization?

A

The lead underwriter penalizes other dealers if their customers flip shares in weak issues. Flipping means selling the shares during, or shortly after, the distribution period. Penalties may include paying back commissions to the underwriter or reducing the number of shares that the investment advisor can receive in future IPOs

115
Q

What is the stabilizing bid when doing after-market stabilization?

A

The dealer posts a bid to purchase shares at a price not exceeding the offer price if the distribution of shares is not complete.

116
Q

What is flipping shares?

A

Flipping means selling the shares during, or shortly after, the distribution period

117
Q

Apart from working with provincial securities commission, is there any other securities distribution that the issuer can do?

A

yes, through the facilities of the TSX Venture Exchange.

118
Q

How does the exchange work with the securities distribution not through province?

A
  • Exchange reviews the prospectus and approves or disapproves it.
  • The prospectus must meet all requirements of both the exchange and applicable national instruments.
119
Q

Who can use The prospectus exemption through exchange?

A
  • The issuer has filed an AIF, is a reporting issuer, and is a SEDAR filer.
  • The securities are listed securities or units of securities and warrants.
  • The issuer has filed with the TSX Venture Exchange an exchange offering document, which incorporates by reference the AIF, the most recent financial statements, and material change reports.
  • The number of securities offered does not exceed the number previously outstanding.
  • The gross proceeds do not exceed $2 million.
  • No more than 20% of the offering goes to one purchaser
120
Q

What are the other methods of distributing securities to the public?

A
  1. As junior company distributions
  2. As options of treasury shares and escrowed (ký quỹ) shares
  3. Through a Capital Pool Company (CPC)
  4. The NEX board
  5. Through Crowdfunding
121
Q

What are the characteristics of distributing securities as junior company distributions?

A
  • raise new capital through a distribution of treasury shares (co phieu quy) to the public.
  • The company must find a dealer member to act either as its underwriter or agent for the offering.
  • These types of companies usually have no record of earnings and few assets that would qualify as collateral for conventional credit sources (such as bank loans, mortgage or funded debt, or government assistance)
  • The funds these companies need is known as risk capital because the project has high risk of failure
122
Q

What are the characteristics of distributing securities as options of treasury shares and escrowed shares?

A
  • A company may decide to offer an incentive to an underwriter to provide risk capital as a principal.
  • This technique involves the use of escrowed shares that serve as payment for properties, goods, or services.
  • Escrowed shares are shares held by an independent trustee in trust for its owner. The escrowed shares cannot be sold or transferred, unless special approval is given. The shares can be released from escrow only with the permission of the appropriate authorities, such as a stock exchange or securities administrator.
  • Escrowing shares ties the value of the shares held by these shareholders to what happens to the property used to obtain these shares. It also prevents the owners of the shares from selling them before a proper market can develop.
    This restriction ensures some stability in the secondary market performance of the new issue after the completed offering. Escrowed shares maintain full voting and dividend privileges for these companies.
123
Q

What are the characteristics of distributing securities Through a Capital Pool Company (CPC)?

A

The CPC program involves a two-stage process:
• In the first stage, a CPC prospectus is filed and cleared, the IPO is completed, and the CPC’s common shares are listed on the TSX Venture Exchange. Under this program, the issuer must raise between $200,000 and $4,750,000 from the IPO.
• The second stage involves the following steps:
1. Within 24 months, the CPC identifies an appropriate business and issues a news release to announce the
agreement to acquire the business.
2. The CPC prepares a filing statement or information circular providing prospectus-level information on the business to be acquired.
3. The TSX Venture Exchange reviews the disclosure document and evaluates the business to see that it meets initial listing requirements.
Shareholder approval is typically not required to close a QT.
-> A CPC describes a newly created company with no assets other than cash and with no established business or operations. A CPC can conduct an IPO and list the shares on the TSX Venture Exchange. The CPC’s goal is to buy an existing business or assets, called significant assets, through a qualifying transaction (QT).

124
Q

What are the characteristics of distributing securities through the NEX board?

A
  • NEX (belong to TSX Venture Exchange) provides a trading forum for companies that failed TSX Venture Exchange’s listing standards ( low levels of business activity, or who do not carry on active business at all)
    • Issuers that used to list on the TSX Venture Exchange but no longer meet the Maintenance Requirements (currently known as Inactive Issuers)
    • CPCs that have failed to complete a QT in accordance with the requirements of the exchange
125
Q

What are the characteristics of distributing securities Through Crowdfunding?

A
  • Crowdfunding is the process of raising start-up capital by soliciting contributions from the public at large, usually aided by online or Internet-based systems.
  • In a number of jurisdictions, the participating regulators have adopted harmonized registration and prospectus exemptions that allow start-ups and early-stage companies to use crowdfunding to raise capital.
126
Q

What is the listing process?

A
  • Company applied -> company signs a formal listing agreement -> approved -> specific date is set for applicable securities to be called for trading on an exchange (formal announcements)
    ( By signing a listing agreement, a company agrees to comply with the following specific regulations:
    • Submit annual and interim financial reports, as well as other corporate reports, to the exchange.
    • Promptly notify the exchange about dividends or other distributions, proposed employee stock options, and sale or the issue of treasury shares.
    • Notify the exchange of other proposed material changes in the company’s business or affairs)
127
Q

What are the advantages of listing?

A
  1. Prestige (uy tin) and goodwill
  2. Established and visible market value
  3. Excellent market visibility
  4. More information available
  5. Simplified valuation for tax purposes
128
Q

What are the disadvantages of listings?

A
  1. Additional controls on management
  2. Need to keep market participants informed
  3. Market indifference
  4. Additional disclosure
  5. Additional costs to the company
129
Q

What are the types of temporary withdrawals of trading privileges that an exchange can invoke?

A
  1. Delayed opening
  2. Halt in trading (a security can be ordered or arranged at any time to allow the reporting and communication of significant news, such as a pending merger).
  3. Suspension in trading (During the suspension, members are usually allowed to execute orders for the suspended security in the unlisted market, except for those securities suspended from trading on the TSX Venture Exchange)
130
Q

What is delisted and who can do that?

A

Delisting is a permanent cancellation of listing privileges. Can be done by the exchange or the request of company itself.

131
Q

What are the reasons of delisted?

A
  1. The delisted security no longer exists because it was called for redemption (in the case of a preferred share) or was substituted for another security as a result of a merger.
  2. The company is without assets or has gone bankrupt.
  3. The public distribution of the security has dwindled (giam) to an unacceptably low level.
  4. The company has failed to comply with the terms of its listing agreement.

Canadian Securities Course VO1 (13 decks)

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