Talking Reverse Takeovers with Miriam Tuerk
November 6, 2020 | TechExit
So … you need cash for growth or share currency to make acquisitions down the road, but you want to maintain control. How does a reverse takeover (RTO) work? What considerations or qualifications should you take into account? Is it achievable in a ‘COVID’ reality?
Join Miriam Tuerk, Co-Founder and CEO of Clear Blue Technologies, as she weighs in with her insights during the TechExit East and West panel discussions, “Going Public as an Option for Liquidity.” In the meantime, Miriam previews that discussion by sharing some of her expertise with us here.
You are part of a panel that will discuss “Going Public as an Option for Liquidity.” Why is this a viable option for tech companies who need cash?
This is a fantastic option for a number of reasons:
- It gives you access to a large base of independent investors interested in investing in early-stage tech companies; rather than venture capitalists (VCs), which can require substantial controls.
- It provides options for how you can structure the finance and company, so everyone is a common shareholder. Basically, in VC, the first ones in, are generally the last out. In some scenarios, that’s not what you want to do. With an RTO, there is access to an infinite number of investors small and large – and everyone is equal when they come to the table.
- Lastly, this gives shareholders liquidity. You have the ability to sell shares at some point and time, which is very attractive to shareholders.
At a high level, can you explain how a reverse takeover works?
There are multiple ways you can become a publicly listed company. A traditional Initial Public Offering (IPO) is a very rigorous and expensive process, but the RTO creates a shorter, simpler, more economical way of going public without full IPO requirements. With an RTO, just like Special Acquisition Company (SPAC), you can find good shells and bad shells. Strong backers are critical. You really need to ensure you work with someone who has worked with RTOs before, knows the process and understands what is coming down the line.
What are a few considerations for companies that are considering RTO? How can they best prepare?
When I went through the process, people said I would have a hard time going through the audit. It’s critically important you get an audit for International Financial Reporting Standards (IFRS). Don’t underestimate how comprehensive this is. Auditors have total control over you once they are selected. Pick the right auditor and get it done. Getting a lawyer who has familiarity with RTOs is also critical. I knew the Exchange and what needed to be done, so our legal bill was very in line with what people tell you it will be.
Of course, you can also have good advisors, on your Board, who have been through it before who will consider what is best for the company and for you.
What are today’s challenges with RTOs?
I think that with RTOs the challenge is the highly speculative market. There are a lot of opportunities that won’t turn out to be real. And there are a lot of opportunities where companies will become listed in the TSX top 100 stocks. There are lots of vapourware and boom and bust around you. Sometimes it’s real, and sometimes it’s a bubble.
When we went public, it was the Cannabis bubble. This year, it’s been e-health and gold. RTOs are an environment that is their own market. In Canada, it’s oil and gas, and it’s the people who are panning for gold in a river in the Yukon. If it’s high tech RTO it is not NASDAQ … it will grow into this, but right now there are not that many high-tech companies in this space. I hope and wish Canada will do more for high tech. We need to build a huge high-tech market in Canada instead of seeing it land in the US.
People need to learn about this market and understand it’s different. That’s why these conferences are so critical. They help educate and bring together investors and young companies in this market.
What takeaways will attendees have from your session?
We’ll take the questions from the audience and share what they want to know. When you are doing an RTO, you really need someone who has done it before. Surprises can be costly and significant. That’s why this event can be so beneficial for those considering this path. If I could do it over again, I would. I would try to learn even more from those who have done it before
Join us for “Going Public as an Option for Liquidity” to hear more great insights and tips from Miriam Tuerk and the other panelists. Register now!