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Follow on Google News | The CPC Program Can Help Junior Miners Raise Capital In Booming Gold Market. Source: Iminesco.comThe current rally in gold shows no sign of slowing down. Gold mining juniors are raising money with the CPC program, a great alternative for financing if you are looking to move forward with your project.
By: Editorial Staff Go to http://tiny.cc/ Gold mining juniors are raising money on a consistent basis on the TSXv (http://www.tmx.com/) We introduced the CPC program to readers in previous blog posts. http://www.tmx.com/ Many readers of Iminesco.com have contacted our team for more information on the CPC program. To that affect we have decided to post this article from Startupnorth.ca which clearly explains the CPC process. http://www.startupnorth.ca/ Going Public with Capital Pool Companies by Craig Hayashi on April 1st, 2010 in Angel Investors For this article I thought I would explore Capital Pool Companies (CPCs) as a vehicle for emerging companies to go public and raise capital. I recently met with Mark Lawrence of NorthCrest Partners. NorthCrest Partners provides advisory services to help companies through the CPC process. Mark has been involved with close to a dozen CPC transactions. CPC overview CPCs are administered and regulated by the TMX Group and trade on the TSX Venture Exchange. This is considered a junior exchange to the Toronto Stock Exchange where listing and on-going regulatory requirements are more suited to smaller sized companies. Once a CPC is listed on the TSX Venture Exchange, its shares can be bought and sold just as with any other exchange like the NYSE, Nasdaq, etc. As the company grows it is quite common for them to ‘graduate’ CPC company formation A CPC starts off when a set of directors puts up seed capital to form the CPC. A minimum of 3 directors are required to put in $100k to $500k of total seed money. This capital is used to write up an investment prospectus and do due diligence on target companies to execute a reverse take over transaction (also known as a Qualifying Transaction “QT”). At this stage, the CPC is not listed on the TSX Venture Exchange. At this point in time, since the CPC is not a real operating company but more of an investment/holding company, CPCs are often referred to as shell companies at this stage. At any given point in time, there can be over a hundred CPC companies established and in the process of finding a qualifying transaction. According to Mark, “Just as in any investment transaction, it is important to ensure there is a good match between the CPC company and the company the CPC will invest in via the reverse take over. From the CPC standpoint, the directors will be looking for companies with good management, good growth potential, and good operations. From the company standpoint, engaging with a CPC shell that can provide strategic value in addition to the CPC’s capital is important. Companies should look at the background of the directors of the CPC and how they can help with their experience in managing a public company with things such as investor relations and ability to access capital markets/institutional money.” The next stage is to take the company public. The CPC needs to have at least 200 shareholders in order to go public, with an individual in the go public transaction buying no more than 2% of the shares offered to the public. A household can hold no more than 4% of total shares outstanding. Between $200k to $1.9m can be raised, so long as the total of seed and IPO does not exceed $2 million. A broker is used to assist the CPC directors in the IPO and in finding retail investors to capitalize the CPC. From a CPC investor standpoint, because the QT may not be known or finalized at this point, you are investing in the directors of the CPC and their plans for the type of company they will do a qualifying transaction. Says Mark, “I would say that 2/3 of the CPCs are established because the directors have a target in mind for a qualifying transaction. However, for half of these, the target does not pan out. As an investor in a CPC, it is important to be comfortable with the directors and their ability to find a quality QT”. Once a CPC is established, the CPC has up to 24 months for it to execute a QT. According to Mark, it typically takes 3 months after a CPC is established to do the prospectus, secure the 200 investors, and find an appropriate qualifying transaction. Concurrent financing Once a target company is identified, it is quite common that additional financing will be required in order to do the reverse take over transaction. The TSX Venture Exchange requires the CPC to provide capital to cover 12 months of operations for the target company. To raise concurrent financing, the CPC typically engages a broker to help pitch the company to institutional investors such as pension funds and mutual funds. According to Mark, “Probably around 90% of the CPC deals require concurrent financing. Concurrent financing can range from several hundred thousand to over one hundred million dollars depending on the company targeted for the reverse take over. I like to target a need of at least $5 million to take the opportunity to institutional brokers and investors.” Reverse take over Once a suitable target company is identified and goes through all of the approvals and paperwork (and audited financials), the CPC completes the qualifying transaction. In essence, the target operating company exchanges its shares for the shares of the CPC shell and takes over the CPC shell company. The management team of the target operating company generally stays as is and the board of the target operating company is re-constituted to possibly include directors of the CPC. The benefit to the target operating company in this approach is that it saves the company the time and expense for it to go through the regulatory process of becoming publically listed. Since the CPC has already gone through this process, the transaction to take the target company can be done in weeks vs. months. When are CPCs a good vehicle for companies to raise capital? CPCs are best suited for growth companies that need capital for expansion. CPCs are not meant to replace early stage seed funding to help companies develop an initial prototype or secure early customers. In order for institutional investors to be interested, they will be looking for reasonably established companies that can use capital to aggressively fuel a growth strategy. They will want to see a roadmap for how a $5m to $10m market cap company can grow to $50m to $100m. From a founders point of view, CPCs should not be viewed as a way to ‘cash out’. Rather its a vehicle to become a public company and open up additional financial strategies such as using company shares as currency for acquisitions or accessing follow on financing from institutional investors. Says Mark, “With the lack of a robust VC financing ecosystem in Canada, being able to secure institutional investors is becoming a more important part of an early stage company’s finance strategy. Since institutional money managers typically do not devote a large portion of their funds to private companies, having publically traded shares via a CPC can help early stage companies tap into this equity class.” >>> These deals happen on a regular basis. This is an example of a September 2, 2010 press release announcing a QT (Qualifying Transaction) http://www.stockwatch.com/ Iminesco.com has access to CPC shells. If you have a project or property and would like to be introduced to a CPC, please contact us today. # # # Iminesco brokers mining properties and claims available on the market. We have a portfolio of claims and buyers of claims which we update on an ongoing basis. Please call 1-888-234-7356 or visit www.iminesco.com for more information. End
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