Public Offerings

Question 1

What is a reporting issuer and how to become one ?

Answer 1

• Entity responsible for emmiting the securities of an IPO
• Have 50 shareholders
• Fill a prospectus
• OR merge with a R.I.
• OR reverse take over (public buying private, to go public)
• Not necessarily a public company

Question 2

What is a prospectus ?

Answer 2

• Document to be filled by an emmiter to be able to do IPO
• An offering of securities
• A solicitation of investors
• Providing investors with all material facts necessary to make an informed decision
• constitutes full, true and plain disclosure of all material facts relating to the securities offered

Question 3

6 steps to file a prospectus ?

Answer 3

1. Drafting: quiet period (no divulging of confidential info = due diligence)
2. Preliminary prospectus (becoming an R.I.)
3. Marketing
4. Final prospectus (sending to subscribed investors- they have a 2 day review period to back out)
5. Payment and delivery (closing of the IPO)
6. Green shoe

Question 4

Types of prospectus ?

Answer 4

1. Preliminary (Red Herring)
2. Final (full, true and plain)
3. Shelf (ready-to-go, for usual issue)
4. Short form (simplified, straight to the point, for already known companies)

Question 5

What is a reverse Take-over

Answer 5

• In a reverse takeover (RTO) a private company uses a public company to introduce itself on the stock market.
• The public company buys the private company and pays the purchase price by issuing shares to the private company shareholders.
• Since the public company is generally much smaller than the private company, the shareholders of the private company become the controlling shareholders of the public company that now comprises their company which used to be private

Question 6

What is the Green Shoe option, and its goals ?

Answer 6

• The underwriter buys up to 15% of the shares of the company before the IPO
• If demand is too low, the underwriter sells its shares cheaper and buys them back
• If demand is too high, the underwriter issues more of its shares into the market
• The purpose is to regulate the price at a target price

Question 7

What are the regulation for crowdfunding in Quebec ?

Answer 7

1. Limit of 1.5 Million$
2. Max investment of 2500$/transfer and 10,000$/year
3. Offered on a platform
4. “Shares” can’t be sold back
5. Continuous disclosure

Question 8

What is a Best-Effort aggreement ?

Answer 8

• Underwritters act as Agents
• Use for risky situations
• Agents promises emmiter to sell as much as it can of the securities
• Doesnt promise to sell-out the IPO
• Reliefs the underwritter from all risk
• However, underwritter receives flat-fee for its service

Question 9

What is a bought deal ?

Answer 9

• Underwritter buys all the securities from the emmiter before preliminary prospectus
• Securities bought at lower price
• Emmiter garantteed all funds
• ALL Risk transfered to underwritter
• Announced in a press conference before final prospectus