While this is not a requirement for an RTO, the name of the listed company involved is often changed as part of the process. For example, Dell IT Group (DELL) completed a reverse acquisition of VMware Tracking Stock (DVMT) in December 2018 and became a publicly traded company again. A reverse acquisition is also known as a ”disguised listing” or ”reverse merger” of a company already listed on the TSX or TSXV. This listing may take place in a variety of ways, including a merger or issuance of shares in exchange for other shares or assets of the issuer. Aird & Berlis Capital Pool Company/Reverse Takeover Group has extensive knowledge and experience in assisting clients in their eligible transactions with the TSX Venture Exchange (TSXV) or the Toronto Stock Exchange under the TSXV Capital Pool Company (CPC) program or its reverse takeovers on the Canadian Securities Exchange or NEO Exchange. Aird & Berlis represents clients in all aspects of the transactions, including the IPO phase of a CPC, the qualifying transaction or RTO, simultaneous financing and the continuation as corporate legal counsel of the issuer resulting at the closing of the transaction. You`ll need the help of your company`s sponsor, lawyer, and auditor to find a suitable candidate for a reverse takeover. In recent years, an increasing number of companies seeking access to Canadian capital markets, including the Toronto Stock Exchange (”TSX”), TSX Venture Exchange (”TSXV”) and Canadian Securities Exchange (”CSE”), have opted for the reverse acquisition transaction (”RTO”) type rather than the more traditional initial public offering (”IPO”). On the other hand, reverse mergers can reveal weaknesses in the management experience and accounting of the private company. In addition, many reverse mergers fail; They don`t end up meeting the promised expectations when they finally start trading. Unlike traditional IPOs, which can be canceled when stock markets misbehave, reverse mergers are usually not put on hold. Many private companies looking to reverse merge have often suffered a number of losses, and a percentage of these losses can be applied as a carry-forward of tax losses on future profits. However, they tend to pose greater risks to investors.
An RTO is sometimes referred to as a reverse merger or reverse IPO. Despite these drawbacks, the RTO procedure is a relatively quick and efficient method of accessing capital markets. The OTR entity must meet the initial listing requirements of the scholarship and undergo an approval process similar to that of an initial listing application. Between 65% and 70% of new issuers listed on the aforementioned exchanges, including the CSE, have actually done so through an RTO [1]. This is especially true for many Canadian and U.S. companies that have been operating in the cannabis industry since their legalization in the fall of 2018, particularly on the CSE, a stock exchange that was originally more lenient by listing companies operating in this particular field [2]. [1] Source: GoPublicInCanada.com [2] 193 companies listed on the CSE are in the cannabis sector, compared to 15 on the TSX and 33 on the TSXV (Source: cse.com – CSE Canna List/mjobserver.com) [3] Source: CSE Report August 2019 We are recognized as a leader in the CPA/RTO field and have a strong reputation for providing experienced legal services, thoughtful and effective. Members of our CPC/RTO group and the entire Aird & Berlis Capital Markets group often act as directors and/or officers of CPCs and the resulting issuers.
For example, between 2016 and August 2019, 85 new listings on the CSE were made through IPOs, compared to 163 through unsolicited OTOs or prospectuses [3] which will be reviewed in a future publication. Internal tax department. ”Instructions for Form 1120: U.S. Corporate Income Tax Return.” Retrieved 21 August 2020. First, a private company buys enough shares to control a publicly traded company. The shareholder of the private company then exchanges his shares of the private company for shares of the corporation. At this point, the private company has effectively become a publicly traded company. A foreign company can use an RTO as a mechanism to access the U.S. market. For example, if a company with branches outside the U.S. acquires enough shares to have a majority stake in a U.S. company, it can merge the foreign-based company with the U.S.-based company.
We are proud that our clients have successfully completed a significant number of eligible and RTO transactions and have become issuers in a variety of industries, including mining, technology, cannabis and agriculture worldwide (including North America, South America, Europe and several African countries). Capital Pool Company Reverse Acquisition Group Profile CPC Program Backgrounder The BOARD of Directors of NEX, managed by the TSXV, offers the opportunity for an additional source for publicly traded mailbox companies. This allows shareholders of a private company to merge with an issuer that does not carry out significant business activity. Richard is a creative and results-oriented corporate finance lawyer. Richard brings his operational knowledge both at home and abroad. Our professionals are at your disposal to advise and assist you in this process, as it is essential for any company considering an RTO to be adequately prepared to identify all issues related to this type of transaction, not only in the corporate and securities sectors, but also in tax matters. In addition, the restructuring of one or both of the merging companies will be adapted to the new business design. Before the RTO, it is not uncommon for the publicly traded company to have had little or no activity in recent times and has existed more as a letterbox company.
This allows the private company to transfer its operations relatively easily into the shell of the public institution while avoiding the costs, regulatory requirements and time constraints associated with an IPO. While a traditional IPO can take months or years, an RTO can be completed in just a few weeks. An RTO is a transaction in which a publicly traded company (”PubCo”) with few or no assets acquires all the shares of a private company with significant assets or business units (”PrivateCo”). This acquisition is carried out by the issuance of shares in the capital of PubCo to The shareholders of PrivateCo in exchange for the share capital they hold in PrivateCo, taking into account an exchange ratio based on the value of PrivateCo`s assets or business activities. Such a transaction typically takes place through a share exchange, merger or agreement, depending on the most appropriate tax structure for the proposed transaction. Therefore, the result of such a transaction is that PrivateCo indirectly becomes public. Although PubCo remains listed on the relevant stock exchange, it now owns privateCo`s assets or business activities, it has undergone a change of control as PrivateCo`s shareholders will generally hold a majority stake (a majority stake of at least 20%) in PubCo after the completion of the RTO; Changes in the composition of the Board of Directors are likely to occur to reflect this change in control. By participating in an RTO, a private company can avoid the costly costs associated with setting up an IPO. However, the company does not acquire additional funds through an RTO and must have sufficient funds to complete the transaction itself. .