Lexpert Magazine

58 LEXPERT MAGAZINE | JANUARY/FEBRUARY 2018 | GOING PUBLIC | Tehrani, who worked closely with Garcia of Blakes on the IPO, says that, despite all the education on public markets and great organization, the experience was "astro- nomical, out of this world, both in terms of paperwork and process." As a 14-year-old company, Zymeworks had already gone through multiple rounds of angel and venture finance before decid- ing to tap public markets. "We had a lot of momentum. We had a number of investors who had reached their final [investment] point, so we needed to be able to hand it over to new folks, to a new set of public in- vestors who could hold the stock for two, five or 15 years," says Tehrani. "Financing is basically like a relay race." Tehrani compares the role of lawyers on an initial public offering to that of airplane mechanics who get the aircra prepared and make sure it's safe for both the pilots and passengers. e lawyers are there "not only to protect the client, but to protect everyone. ey're there to make sure you're following the law. ere's a crazy amount of paperwork, an extreme amount of pa- perwork that's in very difficult language, and the law has to be followed. So lawyers are tremendously important in making sure the company does not sell an empty dream" to investors. He adds, lawyers "mediate a very com- plicated process. ey don't tell your story but they make sure you don't overempha- size it, or over-hype it, and that all the regu- latory rules are being followed properly. If you don't follow a very complicated set of laws very carefully you can delay your IPO, you can damage your IPO, or do some- can give executives to plan, to think about it, and to put processes in place to address it, then the smoother it goes," Garcia says. "For example, the prospectus has certain financial-statement requirements. If you get into draing the prospectus and you're a week away from filing it and you say, 'By the way, do you have your three years of au- dited financials?' "And they say, 'You never told us we needed that.' Well, everybody's going to be exceptionally stressed out. Or, from the governance perspective, who would qualify to sit on your audit commit- tee? If you don't address any of those issues until the last moment, how are they going to recruit folks? "at's why successful IPOs oen come down to the preparation. If you don't help the client plan, you might cause delays, you might lose the window to go public." In addition to all the prospectus work and draing sessions, Garcia says the com- pany and its lawyers also need to commu- nicate with existing private shareholders, who will have to agree to amend the com- pany's articles of incorporation to change it into a public company. e number of moving parts required to make the transition to a listed public company can be mind-boggling. Just ask Ali Tehrani, President and Chief Executive Officer of Zymeworks Inc. He has seen it close up. Vancouver-based Zymeworks Inc., the biopharmaceutical company Tehrani co- founded, raised US$58 million in an IPO and started trading on both the Toronto and New York stock exchanges in April. thing you didn't intend to." Lawyers who work in this area say there is at least a three- to four-month process from when you start to dra a prospectus to closing, marketing and then actually go- ing public — with another six months or more of advance planning before that. "It's very confusing. ere's a lot of work to be done," says Tehrani. "Joe was there, around the clock, no matter how complicated or how simple the question was. You may have to call your lawyer 25 times a day, at any hour, and it's not like we're their only client. When they take the time and give you the attention, it really helps you get through a very stressful period, and we're very grateful." Aer going through the process, Teh- rani is convinced it's not the right route for everyone. "Going public means you're com- pletely open, exposed to everyone, and you have to have the right story, a robust story to tell, or a couple of people can tank your company valuation just by trading a couple of hundred shares. So going public is not for everyone." Deborah Weinstein of LaBarge Wein- stein LLP in Ottawa couldn't agree more. With the resurgence of initial public offer- ings in 2017 making headlines, business owners have begun talking to their lawyers about going public. But not every company — and not every client — is suited for the public arena. In fact, she says, with a few notable exceptions, "most pure entrepre- neurs are not." Many entrepreneurs don't have formal business training; they come from back- grounds such as engineering, computer technology or marketing, she notes. "What it takes to be an entrepreneur — a lot of vision, great communication and great building-block skills — is quite dif- ferent from what you need to run a public company," she says. "It's a different kind of communication: to investors, not custom- ers. You also need the ability to scale up and, most importantly, the ability to man- age the business short-term for quarterly financial results while maintaining a long- term vision." Luckily, she says, 98 per cent of her busi- ness clients never intend to go public. eir plan is usually to grow the business and sell when the time is right. But some do want DEBORAH WEINSTEIN > LABARGE WEINSTEIN LLP "What it takes to be an entrepreneur — a lot of vision, great communication and great building-block skills — is quite different from what you need to run a public company. It's a different kind of communication: to investors, not customers."

• Cover
• front