Dual listing on the Toronto Stock Exchange (“TSX”) or Toronto Venture Exchange (“TSXV”) and the ASX is not a new concept, with many Australian companies having great success in raising capital on the TSX (one of the world’s largest exchanges), the TSXV and other available exchanges in Canada.
Why do companies look to international markets to raise capital as opposed to raising locally?
First, dual listed entities enjoy a larger pool of investors than those companies whom are restricted to trading on one market. Not only are there are larger number of potential investors, in the case of securities exchanges in Canada investors are also said to have a greater affinity for, and understanding of, resource companies. Given this understanding, a company may derive a greater valuation on a securities exchange in Canada than it may on the ASX or other international markets. A larger pool of more sophisticated investors increases a company’s potential access to capital, thus increasing the probability of executing a successful fund raising.
While the increased access to capital is one of the fundamental advantages of a dual listing, it is only one of the key considerations. The second advantage stems from operating on two distinct capital markets. Spreading an organisation’s fundraising activities across two economically distinct markets may reduce an organisation’s exposure to macroeconomic factors, factors that may affect ongoing capital raising ability. This allows dual listed entities to turn to different markets at different times depending on the prevailing economic conditions of either market.
Finally, dual listed entities generally enjoy increased liquidity. This increased liquidity often comes from having access to a larger investor pool that draws from two distinct global markets. In theory, the greater the number of potential investors, the greater the potential demand for a company’s stock and, therefore, the greater the liquidity of the stock itself.
As demonstrated by the advantages listed above, there are numerous reasons why companies pursue a dual listing on a foreign market, but there are challenges that you must contemplate. (For ease of reference, this article will focus on a dual listing with the TSX. However, it is worth noting that many entities in the start-up or exploration stage will initially begin by listing on the TSXV, as the listing requirements, prospectus and continuous disclosure requirements are less onerous than those experienced when listing on the TSX.)
1) Assembling the right team
Making sure you have the right team to support your listing is vital. This includes legal team, financial advisors, underwriters and auditor, all of whom should have experience in dealing with the intricacies of listing on the TSX.
It is important to note, whilst you have to look for an experienced and accomplished underwriter, underwriters will also have criteria that they will look to have fulfilled prior to agreeing to usher your company onto a capital market. Before committing to a company’s listing, an underwriter will carefully assess several factors, including but not limited to:
- The health of the company’s industry, the quality of its products, its market position and growth potential;
- The company’s earnings record and prospects for earnings growth;
- The company’s systems and controls to ensure that they are appropriate for a listed company environment;
- The current management team and board of directors’ experience and leadership;
- The company’s sources of supply and distribution channels;
- The company’s customers and reputation;
- The stability of the company’s financial position, including capital structure and asset utilisation.
In the instance of the TSX, issuers must also realise that there is an expectation to have some presence in Canada. Satisfying this expectation may be as simple as having a member of the board of directors or management, an employee or a consultant of the issuer based in Canada.
2) Fees – a dual listing comes at a cost
In the instance of the TSX, listing fees are calculated using a bracket system based on market capitalisation, similar to that of Australia. Noting, a discount of up to 25% may be on offer to International inter-listed entities.
3) Increased reporting and disclosure requirements
The reporting requirements of listing on two markets can create headaches for newcomers, particularly in circumstances where their advisors are not aware of the ongoing reporting obligations of the TSX or TSXV.
It is important to ensure that your organisation is not only aware of the reporting requirements of the relevant exchange but also to ensure that your internal team and external advisors are appropriately resourced an in a position to understand and comply with all foreign reporting and disclosure standards.
4) Market appetite
Organisations considering a dual listing will conduct extensive research on the market appetite for their company, including appetite for the industry and projects.
The TSX has historically had a strong presence in the resource market. The investing public are accustomed to resource companies and the inherent risks associated with early stage mining ventures. These matters however do not guarantee a successful raise. The market has grown significantly in the last ten to fifteen years so it may be difficult for smaller exploration or development stage companies to garner visibility and support.
The TSX is also a popular platform for start-up companies in a variety of other industries, including technology, agriculture and the life sciences.
5) The Distance
Yes, it may sound trivial but if you move forward with a listing on the TSX the distance can have a significant effect on the operating rhythm of your organisation. From teleconferences at all hours and long haul flights, nothing tests the resilience of your organisation’s management quite like the tyranny of distance.
Distance makes the appointment of the right team even more important. A listing on the TSX or TSXV requires a lot of effort. Having the right people on the ground in Canada and in Australia means that you can rest easy knowing your listing is being handled appropriately.
How can we help?
BDO Australia has significant experience assisting clients to list on many different securities exchanges. We have a senior team that has the technical knowledge and commercial acumen to ensure that we assist clients to negotiate every step of the way.
BDO Australia is also registered with the Canadian Public Accountability Board (“CPAB”), which means we have the capabilities to handle TSX listings. We also have a strong working relationship with BDO Canada, providing support and comfort for your organisation in both jurisdictions.
BDO Canada add additional support for your organisation through quarterly reporting as well as providing insights and trend analysis on the Canadian market. This ensures that BDO clients listed on the TSX meet their reporting requirements and are kept up-to-date with the issues affecting their industry.
Our Canadian and Australian based teams have the experience in assisting Australian entities gain dual listing, for example, in 2011 BDO was instrumental in the dual listing of Aurora Oil & Gas Ltd, helping it to list on the TSX.
“BDO Perth (Western Australia) and BDO Canada played a vital role in our listing on the TSX. The team on both sides of the world worked seamlessly with Aurora to deliver a successful listing.”
- GRAHAM DOWLAND, FORMER FINANCE DIRECTOR, AURORA OIL & GAS LTD
BDO also assisted Aurora with their ongoing reporting and compliance requirements, for both exchanges, as well as being instrumental in numerous subsequent debt and capital raisings. It is worth noting that Aurora Oil & Gas Ltd was eventually taken over by Canadian based oil and gas company, Baytex, for approximately $1.8billion (AUD).
If you would like more information on how we can assist your organisation or if you would like to discuss whether a dual listing would be right for your organisation’s fundraising needs, please do not hesitate to contact me.