Why Should U.S. Companies Consider Public Venture Capital?
At MedCity INVESTa conference highlighting healthcare and life science investment trends and healthcare startups, one panel discussion focused on public venture capital in Canada and the lessons U.S. companies can take away from this practice.
The panel, Raising public venture capital in Canada: A case study for U.S. healthcare companieswas sponsored by Cozen O’Connor and TSX.
The speakers included:
- Andrew Elbaz, co-chair, Canadian Capital Markets and Securities, Cozen O’Connor
- George Khalife, vice president, U.S. Capital Formation, Toronto Stock Exchange
Public venture capital is a viable option for U.S. companies looking for alternative growth paths, according to Khalife. Companies can access public markets in Canada earlier than they would otherwise in the U.S., due to the two-tiered model of TSX Venture Exchange and TSX.
TSX Venture Exchange is known as a junior exchange that companies can use to list and lay the groundwork for preparing to list on the Toronto Stock Exchange. Among the financial requirements are two years of audited financial statements versus three years for the senior market, the Toronto Stock Exchange), and for certain earlier-stage companies, an exemption can be made allowing them to provide only one year of audited financial statements.
This patient capital enables companies to stay true to their founders’ vision and allows emerging companies to access public markets, while providing a seamless path to graduate to the senior exchange, TSX, opening doors to potential dual-listing on major U.S. exchanges in the future, according to Khalife.
More than 750 companies have graduated from TSX Venture Exchange and listed on TSX.
“U.S. companies do not have to be incorporated in Canada to go public there, although having some nexus/tie into the Canadian market is preferable,” Khalife said.
Among the reasons why U.S. companies would consider public venture capital:
- Less-dilutive capital source
- Using shares as a currency for M&A purposes
Khalife and Elbaz noted that of the 150 life science companies listed on the Toronto Stock Exchange, 88 listed in the past 4 years. Additionally, 250 companies with headquarters outside of Canada are listed on the Toronto Stock Exchange. More than half of these companies (126) have their headquarters in the U.S.
Photo Stephanie Baum