Canada: Renewable Energy & Clean Technology Initial Public Offering Checklist

Last Updated: February 18 2019
Article by Darrell R. Peterson

Canada's Capital Markets for Renewable Energy & Clean Technology

Canada's world leading renewable energy and clean technology capital markets offer a wealth of opportunity, with their access to local and global investors, finance opportunities for companies at all stages, and sophisticated technical know-how.

While Canada has several public listing platforms, Toronto Stock Exchange ("TSX") and TSX Venture Exchange ("TSXV") are the principal and most relevant exchanges for renewable energy & clean technology companies.

  • Global Leader - TSX and TSXV are home to 85 renewable energy & clean technology companies with a total market capitalization of $37.1 billion.
  • Access to Capital - Over $2.1 billion in equity capital raised through 66 financings in 2018.
  • Liquid Trading Market - Nearly $16.4 billion of equity traded in 2018.
  • Analyst Coverage - Renewable energy & clean technology companies listed on TSX and TSXV are covered by almost 50 equity research analysts with an average of 6 analysts covering TSX listed companies.
  • Global Visibility - 40% of daily trading on TSX and TSXV originates outside of Canada.

Participants in an Initial Public Offering (IPO)

Issuer

  • The issuer sells securities to the public (called a "New Issue IPO"), or a major shareholder sells to the public the issuer's existing shares that the shareholder owns (called a "Secondary Offering IPO"). To address both issuer financing and shareholder liquidity needs, an IPO can be a mixed New Issue IPO and a Secondary Offering IPO
  • Dual class share structure with one class having superior voting rights is permitted but stock exchanges and underwriters will require certain protections for shareholders, including "coat-tail" provisions to ensure equal treatment in the event of a take-over bid. Dual class structures may not be as attractive to investors, who may find them more difficult to value and understand, and such structures may be subject to greater scrutiny by institutional investors
  • There is flexibility in determining which type of entity to use as the issuer (i.e., corporation, limited partnership, trust, etc.)
  • Issuer need not be Canadian, but cross-border tax and securities law implications for nonCanadian issuers should be considered early in the process
  • If using a non-Canadian issuer, stock exchanges and underwriters will require certain shareholder protections that match Canadian or Delaware law, principally:
    • control over election of board of directors and ordinary shareholder matter–usually requires majority of shares voted at shareholders meeting
    • control over fundamental changes, such as a sale or merger of the issuer or a sale of all or substantially all of the assets of the issuer–usually requires two-thirds of shares voted at shareholders meeting

Exchanges

  • The Canadian marketplace is dominated by two securities exchanges:
    • Toronto Stock Exchange
    • TSX Venture Exchange
  • An issuer effecting an IPO will likely apply to have its securities listed on one of those Exchanges
  • During the listing process, the Exchange reviews key minimum business parameters, including working capital, financial resources, number of shareholders, market capitalization and suitability of management and directors
  • Each Exchange has different listing requirements; the TSX, being the senior exchange, has the most stringent listing requirements
  • Canadian provincial securities regulators also recognize this division; "Venture Issuers" listed on the TSXV are subject to simpler continuous disclosure requirements
  • Exchange listing categories:
    • The TSX has two categories of listing for renewable energy & clean technologies issuers:
      • TSX Exempt Issuers and TSX Non-Exempt Issuers
      • These requirements are geared toward the stage of development of the issuer at the time of listing
      • Exempt issuers are more advanced and so subject to less stringent reporting requirements
  • The TSXV has two categories of listing requirements for renewable energy & clean technologies issuers:
  • TSXV Tier 1 Issuers and TSXV Tier 2 Issuers
  • Tier placement depends on historical financial performance, stage of development and financial resources of the issuer at the time of listing
  • Tier 1 Issuers are more advanced, with more significant financial resources; they are subject to decreased filing requirements

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