NEO Exchange's new go-public vehicle will help enable smaller companies: CEO
The NEO Exchange is launching a new pilot program aimed at helping smaller companies go public through a vehicle similar to a special-purpose acquisition company (SPAC) but with less onerous restrictions.
The program, referred to by NEO as a Growth Acquisition Corp or "G-Corp", will be available for smaller companies that don't typically meet some of the financing requirements that businesses looking to go public through a SPAC would. Those include a lower capital minimum to raise, higher governance and financial disclosure requirements, and needing shareholder approval for businesses to go public through a G-Corp.
"There's a lot of companies here in Canada that are too small for a SPAC and not venture companies anymore," said Jos Schmitt, co-founder and chief executive officer of the NEO Group of companies, which includes the NEO Exchange.
"We all know that we have a bit of an issue in Canada raising that type of capital for those type of companies. So, what we said is ‘let's create a vehicle that is really zoomed in on that segment.’"
SPACs have appealed to companies looking to raise capital as they offer a faster route to public markets compared to initial public offerings. The SPAC itself is a blank-cheque company that raises money from the public and plans to buy a business in a set amount of time. Once that deal is completed, the business takes the SPAC’s place on the stock exchange.
Interest in SPACs has soared, with 308 companies raising nearly US$100 billion this year alone, easily surpassing the proceeds raised in 2020, according to industry data tracker SPAC Analytics.
The NEO Exchange has been one of the more active platforms for SPAC issuers in Canada, with 10 companies raising $2.4 billion through such vehicles. Already two companies - Canaccord Genuity and Wildeboer Dellelce LLP - are exploring ways of listing a business through a G-Corp, the exchange said in a statement.
"I think we build a bit of an image of being very innovative and coming up with new ideas," Schmitt said. "We have two early adopters and a number of other ones who are in the process. It's a very solid pipeline."