51 Frequently Asked Questions Getting listed QUESTION Answer Do I have to give up control of my company in order to go public? No. Many companies structure their offerings so that after the initial offering, the owner(s) still have control. If the shares held by the public are widely distributed, management may maintain effective control, even when it owns less than 50 percent of the shares. If more than 50 percent of a company’s shares are sold to just a few outside individuals, however, the original owners could lose control of the company. Are there any courses on being a public company? Managing the responsibilities of corporate governance and continuous disclosure can be challenging for companies. The Exchanges offer interactive workshops that provide the critical information necessary to run a successful public company. Visit www.tmx.com/learning for more information. How much capital should be raised on an IPO? This depends on the amount of funds your company needs to raise and, of course, on investor interest in your company. You must be able to justify your specific need for capital to investors. Your company’s management must also carefully consider the degree of control they wish to retain – although when a company goes public, a reasonable percentage of the shares must be publicly owned. Who sets the original share price on an IPO? Your company sets the share price, with professional input. Your broker will advise you on the price the market will bear, which is ultimately driven by investors. Investors must be convinced that the price reflects the value of your company. Beyond your company’s revenues, other contributing factors to the original share price are: past earnings, projected future growth, the economic climate, and market sentiment in general. In the last decade, investors have become increasingly savvy about reading balance sheets and understanding the impact of operating expenses, debt, share dilution, and the cost of executive stock options. Before buying shares, many will examine these aspects and even discuss a company’s shares on the Web in public forums. When pricing shares, it’s important to remember that the stock market is an auction where buyers and sellers come to mutually agreeable terms about prices. Is sponsorship required for all new listings on Toronto Stock Exchange and TSX Venture Exchange? Not necessarily. Sponsorship by a Participating Organization of the Exchange is often required to ensure an applicant meets minimum listing requirements. However, the Exchanges have discretion to waive the sponsorship requirement if the applicant is filing a full prospectus, completes a brokered financing immediately before or concurrently with listing, meets certain profitability tests, or satisfies other criteria. Graduates of TSX Venture Exchange to TSX may also have the sponsorship requirement waived. Sponsorship by a Participating Organization is not an ongoing relationship, but a onetime interaction that takes place around the time of listing. Are there requirements as to the composition of the board and management? The Exchanges require that: • The board and/or management include persons with public market experience, including experience with North American capital markets, and relevant industry experience for the sector. • The board have a minimum of 2 independent directors. • Management include a CEO, CFO and Corporate Secretary.
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