Put on a pot of coffee.
Open outcry or electro outcry markets are not illegal really. The CDNX started that way, with no regs but the security regs of the jurisdiction. These govern you more than exchange regs. You have to get to be a reporting issuer to sell stock on the grey market.
The weakness of street markets is that they do not centralize trades. They are all pooled markets, (i.e. <font color="shockingpink">the pink sheets</font>) where brokers will trade with some and not others. If one does not deal with the MM the price quote is moot. And with only one market maker as on most street markets, you have to deal with the MM for every trade in and out at the quoted bid or ask. Don't try to get in between the spread and get filled. It is fruitless. The CDNX and other markets like it are of dubious benefit to the shareholders, except in very exceptional situations.
Becoming a reporting issuer in a province means that while not listed you can still sell stock to any tom, dickhead or harry. But heaven forfend if you try to list that honey on an exchange later in the equation. You did not go to your brokers for your shareholders, so they will NEVER support your market. You will be held up for a year or two, having met all regs to a T. Once you list, the brokers will short you to death as they are not stepping on any of their members toes in doing so. Usually a phone call from a broker who is supporting will stop too predatory an action, as they all depend on each other's goodwill, with some exceptions. If a broker is shorting your stock, it is usually the underwriter of your last financing.
Scared now? No? Well, why not?
What is involved in becoming a reporting issuer? I am not sure. It involves meeting a few basic criteria of the jurisdiction. There are tricky ways to do it. I know what they are, but discussing them is really boring. It requires a few ten K's of shekels.
To take a company public on the TSX can be done in a few ways. You have a max of 35 seed investors. You can have few more accredited investors. These investors are legal under what are called exemptions. In other words you cannot ordinarily sell stock to strangers if you are not a reporting issuer, unless you and the investors meet these exemptions regs. There is a regular IPO or a CPC for issuers. Dealing with mining, the CPC is brought on the exchange with the proviso that it has NO property in it. Then once IPO'd and listed, it has 18 months to find a QT or property of merit wich it normally buys for shares. Before that time, it only has a certain status, where its activities are restricted. There are lots of complex regs surrounding this and the QT. The first 100K must be raised by the directors. Then the rest, no more than 400K can be raised by X other people. More regs here. The price you raise your first dollars at must be half the IPO price. All fixed prices within a certain range. All this is covered by about 50 pages of regs. The CPC need about a minimum of 150K to approach a broker and list. It will spend about 100K by the time it is listed. Listing may bring it from 400K to 1.7 million. You need 200 shareholders by the time you list. A sponsoring broker must be obtained for this process.
Another way is to IPO with a property, with money in it. You need a property, 100K spent on it in the last two years, and 150K in the company when you list. The listing process should put the money into the company, but no broker will look at you without a 100K to offset expenses. So you have to do it with 200K.. You have to get 300 shareholders to list. The only way to do that is through a broker. Well you can do it by the reporting-issuer-first route, like Barker did, but you are at risk in the market after. The idea is you become a reporting issuer through the IPO and list as well. You can IPO this type of company at a market set price.
The CNQ is easier to list on. It requires many of the criteria of the TSX but the sums are smaller. It requires a property of merit, money spent, but only 150 shareholders. It's rules are looser. The catch is there are fewer brokers who will take you on the CNQ as its market is not that exciting. The CNQ has no CPC program. That is unique to the TSX.
The other exchange of which I know little is the junior TSX. It is like the old CDNX for junior explorers. I have not researched its regs. It was brought in to compete with the CNQ.
Our friends at Shield took the CPC route and are apparently on the way having met all the regs, and interminable other delays, where they file their prospectus in order to get approval to IPO. This took one year or more for manifold complex and unmentionable reasons. We will tell you about our getting stuck in the closet at the whorehouse, but not that other grotty stuff. There are limits.
I actually have 80% of the stock of a reporting issuer shell. I think. But the issue is so complex and the infighting so ridiculous that I walked. The thing is worth money and could be listed simply by updating its financials and throwing a 100K at it. That is about as easy as one could list in this planet. But it is not that simple in real life. If any one wants one, I suppose I would sell my stock, IF I can get the other 20% to agree to being real for five minutes. But they probably side winded me since I walked. Not legal, but you know where they decide those issues.
Starting a stock market would cost money. I know some people who tried to start one in 96. The competition from the CNQ and the mini TSX etc...sort of takes your market away. Not to mention those silly pink sheets, which I only had one fight with, and no way I go in that alley again.
The cost to your clients is paying the cost of the quote system, the people who do the DD on the filings, and that usually means about 20K per issuer. Then there is the cost of getting reporting issuers. I would put that at 30K let's say. Should you allow 100 shareholder wonders on the exchange? Companies with no properties? They need financials, competent directors, prospectuses, offices, etc.. Otherwise you could get problems. The cost to run a CDNX company was about 75K per year in the old days. Add a little explo and you could do it for about 150K bare minimum. I like the idea of micro-micro companies, but people have to run the exchange. I would say that would cost about 750K per year and that is a minimum of 50 companies to make money.
EC<:-} |
