From left: Andrew Elbaz of Minden Gross; Brandon Roop of Stifel GMP; George Khalife of Toronto Stock Exchange; and Alexander Katznelson of Minden Gross.
Going public has long been an option for growth stage healthcare and life science companies but this exit in the U.S. markets is typically regarded as a more realistic option for late stage companies. At the MedCity INVEST conference this week, a panel discussion sought to challenge that assumption by drawing attention to an alternative path to consider for earlier stage companies: Going public in Canada on the Toronto Stock Exchange or the TSX Venture Exchange.
Sponsored by Toronto-based law firm Minden Gross, the panel discussion was led by Andrew Elbaz, a partner with the firm, who served as moderator. He was joined by Alexander Katznelson, an associate with Minden Gross, George Khalife, vice president of U.S. Capital Formation with the Toronto Stock Exchange, and Brandon Roop, director of healthcare investment banking with Stifel GMP.
The discussion highlighted some of the advantages to going public in Canada and sought to challenge some of the misconceptions about listing on the Toronto Stock Exchange.
“Toronto is one of the best places to do business among G20 countries,” said Khalife. “It’s the third largest exchange in North America. Within the past 5 years, Canada has raised roughly $234 billion in equity capital.”
A two-tiered system
In Canada, there’s a junior exchange known as TSX Venture Exchange (TSXV) which companies can use to list and lay the groundwork for preparing to list on the Toronto Stock Exchange. Khalife likened the system to going from the NCAA to the NBA.
“The mindset of what we deem early stage on the public markets is different in Canada than it is in the U.S.,” Khalife said.
He noted that the TSX Venture Exchange is a bonafide, regulated 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.
Khalife observed that although it can be tough for the early growth stage companies to meet the financial requirements as they prepare to go public in Canada, it can be very helpful for giving young companies the fiscal discipline that will help them thrive and prosper.
Boost visibility
Panelists noted that going the Canadian route allows companies to stand out in a couple of ways. For one thing, a life science company with a market value of C$50 million (U.S. $40.04 million) would be considered among the top 10 life science companies in Canada. By contrast, that same company in the U.S. market would rank a measly 398 among life science companies.
There are 221 healthcare-related companies listed on the Toronto Stock Exchange. Of these companies, 183 have a market cap of less than U.S. $80 million.
Roop added that another benefit of going public is that analyst coverage can help further raise the profile of healthcare and life science companies. In the U.S. market, Roop contended that companies would have to have a much higher market cap to get the analyst coverage they get in the Canadian market.
Roop noted that although several health tech companies have gone public in Canada in the past year, medical device companies have fared better.
Less rigorous requirements for early growth stage companies
Although he acknowledged that it can seem intimidating at first, Khalife said that the level of readiness for TSX Venture Exchange would ask for is not massively different than what would be expected of a company looking to accomplish a growth-related milestone, such as raising a Series B or C financing in the U.S. for instance.
Among the listing requirements are $750,000 in net tangible assets or $500,000 in revenue or $2 million raised in financing. Companies need to have a minimum of three directors and two need to be independent.
Still, Katznelson cautioned companies not to be hasty in their pursuit of a listing on the Toronto Stock Exchange. They need to ensure they have their [financial] ducks lined up in a row.
Diverse group of investors
Roop observed that one misconception about going public in Canada is the assumption that these companies are limited to Canadian investors. He pointed out that public companies in Canada have a diverse group of investors. They span family offices, hedge funds, asset managers in the U.S. as well as Canada.
“We’ve had [investors] as large as BlackRock.”
