For many domestic Chinese companies, listings overseas are always a long-term strategy. By exploring the international public markets, Chinese companies can not only raise funds, but also achieve their goals with respect to expanding in the global market, promoting their brands and improving their corporate governance. Despite the fact that the Shanghai Stock Exchange is booming these days, domestic Chinese companies still pay close attention to accessing to a more mature and sophisticated public market overseas, where long-term investments as opposed to short-term speculation are the main focus. NYSE, NASDAQ, AIM and the HK Stock Exchange have been deeply rooted in the mind of Chinese companies; only a few businessmen in China recognize that the TSX Group is also a big player in the international capital market. To highlight some features, TSX Group ranks 7th in the world and 3rd in the North America by total listed company market capitalization, and its equity exchanges are among the best markets in the world for raising public equity capital. The main board of the TSX is superior to the HK Stock Exchange and close to the NASDAQ in terms of capital sufficiency, P/E multiple and market capitalization.
In addition, the TSX main board and TSX-Venture Exchange are designed for companies at all stages of growth. Small or medium enterprises at an early stage of their development can be accepted by the TSX-Venture as long as they indicate their future growth to their investors. In particular, the TSX Group is one of the best capital markets in the world with respect to financing for junior mining explorers or natural resources companies.
Among the methods of accessing the Canadian public markets, the TSXVenture provides a unique program called the Capital Pool Corporation (the “CPC”), in which a private company obtains public company status by way of completing a Qualifying Transaction through purchase, amalgamation, merger or arrangement with a listed CPC on the TSX-Venture. The CPC program is similar to a Reverse Take-Over (“RTO”) in that they both involve shell listing companies being taken over by a private company. But the CPC is a brand new and “clean” shell without any operational activities. As a result, the resulting issuer, upon completion of the Qualifying Transaction, would not encounter any historical problems or assume any pre-existing obligations. Furthermore, the CPC program has such other advantages as: (1) quicker process, which usually takes less than six months for a private company to be listed on the TSXVenture; (2) cheaper costs because, unlike the RTO, there are no expenses on purchasing the shell company; (3) a greater likelihood of success under this method because, through the CPC program, the private company is more likely to be listed than the Initial Public Offering (the “IPO”); and (4) fewer regulatory reviews. A company in the CPC program only needs to communicate with the TSXVenture Exchange, but, in an IPO, the company has to deal with both the exchange and the securities commissions. Based on the reasons above, the CPC program on the TSXVenture is much preferred by medium and small foreign enterprises.