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CSE proposes new senior tier for scale-up companies and SPAC program

Aird Berlis | Russell J. Sanders, Jeffrey K. Merk and Brodie Kirsh | Dec 17, 2022

going spac public - CSE proposes new senior tier for scale-up companies and SPAC programThe Canadian Securities Exchange (“CSE”) describes itself as the “Exchange for Entrepreneurs,” and in this role has carved out a great niche for itself in the marketplace by welcoming early-stage companies, including a host of cannabis and psychedelics companies. Today, the CSE has over 700 listed issuers, many of which are early-stage, emerging companies.

In order to continue to evolve with developments in the Canadian capital markets, particularly with many more established companies choosing the CSE as their preferred Canadian stock exchange, the CSE has initiated a proposal (the "Proposal") to create a new senior tier (the “Senior Tier”) for larger and more advanced issuers which commonly list their securities on the Toronto Stock Exchange or NEO Exchange Inc. As we have discussed in prior articles, special purpose acquisition corporations ("SPAC") and similar “blind pool” listed companies have been a feature of the Canadian capital markets landscape for an extended period of time. Prior to the Proposal, the CSE did not have a SPAC program so, not surprisingly, one of the other focal points of the Proposal is the creation of a CSE SPAC program.

See:  The Real Story of Access to Capital

Although this publication focuses on the potential creation of the Senior Tier and the CSE SPAC program, the Proposal contains additional amendments to CSE policies that, if enacted, will be the subject matter of additional publications by the Capital Markets Group at Aird & Berlis.

How does an issuer qualify for the Senior Tier?

In order to qualify for a listing on the Senior Tier, an issuer must have: (i) a public float of at least one million freely tradable securities; and (ii) at least 300 public holders each holding a board lot. An issuer must also meet at least one of the following tests:

  1. Equity standard
    • Shareholders' equity of at least C$5 million; and
    • Expected market value of public float of at least C$10 million
  2. Net income standard
    • Net income of at least C$400,000 from continuing operations in the last fiscal year or in two of the last three fiscal years;
    • Shareholders' equity of at least C$2.5 million; and
    • Expected market value of public float of at least C$5 million
  3. Market value standard
    • Market value of all securities must be at least C$50 million;
    • Shareholders' equity of at least C$2.5 million (including the value of any offering concurrent with listing); and
    • Expected market value of public float of at least C$10 million
  4. Assets and revenue standard standard
    • Total assets and total revenues of at least C$50 million each in the last fiscal year or in two of the last three fiscal years; and
    • Expected market value of public float of at least C$5 million

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