There are three common ways to go public on Canadian stock exchanges:
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Initial Public Offering
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Reverse Take-Over
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Qualifying Transaction of a Capital Pool Company on TSX Venture Exchange
Initial Public Offering (IPO)
Initial Public Offering is to issue shares to the public by way of a prospectus and list on a Canadian stock exchange simultaneously. IPO is suitable for large companies with large issuance. For foreign issuers, it takes more time and costs more to complete the listing process than a reverse take-over. It also requires an underwriter and the financing is largely depends on general condition of the capital market.
Reverse Take-Over (RTO)
A listed issuer (shell company) without substantial operations acquires assets and/or business from a private company through share swap. From legal perspective, it is the shell company acquires the private company. From accounting perspective, the shareholders of the private company controls the shell company through share swap. Foreign private companies and get listed through RTO. RTO is convenient. However the due diligence on a traditional shell may be costly due to long history of the shell company. Therefore, there are some potential risks.
Qualifying Transaction of a Capital Pool Company on TSX Venture Exchange
Capital Pool Company is a special kind of shell company. CPC program is offered by TSX Venture Exchange. A CPC has to complete a qualifying transaction (QT) within 2 years from the day of listing. Usually QT is conducted by way of share swap, the same as with a reverse take-over. The advantages of CPC include clean shell company without long history, quick and relatively simple process, low costs, less dilution and flexible financing arrangements.