56 LEXPERT MAGAZINE
|
JANUARY/FEBRUARY 2018
| GOING PUBLIC |
calls the transition from private to public
"a sea change for clients with no previous
public markets exposure," which is why she
feels that job one for their lawyer is to sit
down with them and discuss the merits of
going public versus doing a private financ-
ing or sale.
"We always have that discussion," says
Grewal, who advised Aritzia Capital Corp.
in the fashion retailer's initial public of-
fering at the end of 2016. As the issuer's
counsel, Grewal says it is her job to educate
clients about matters such as "the addi-
tional compliance framework of not only
disclosure, but also the governance frame-
work that applies to a public company, the
additional costs associated with that, and
the tradeoffs with a private sale where you
don't have those ongoing costs and opera-
tional issues to deal with.
"ey all factor in. e evolving transi-
tion into public-company reporting and
governance are always discussed."
Does she ever try to talk them out of it?
Grewal says it's more like she tries to talk
them through it. "If you have a founder-led
company, part of what we'd say is, what
are your objectives? Yes, you have access
to markets and to greater capital if you go
public. But on the other hand, you have
more flexibility and greater control as a
private company if you don't. So part of the
exercise is, you have to weigh that."
Clients new to public markets also need
to understand the costs. While they vary
based on company, industry, stage or pre-
paredness — including how much work
is needed to transition to public-company
compensation and governance structures
Companies going public need to appoint
a full management team, including a chief
financial officer, if they don't already have
one. Previous years' audited financial state-
ments need to be lined up, and investor
relations covered. ey need to assemble
a board of directors, including those who
meet regulatory requirements for indepen-
dent directors and those who can sit on the
audit committee. Underwriters have to
be hired to cra the company's story and
growth plan in a way that will make inves-
tors want to buy the stock — but without
straying into speculative terrain.
ese are just some of the preliminary
pre-filing and pre-marketing steps. To get
some sense of the complexity, consider
— Grewal says the total legal fees include
those for issuer and underwriter counsel,
fees for the securities regulator and stock
exchange, and marketing and road show
expenses, but excludes things such as print-
ing, translation and auditor fees.
Public companies also face ongoing
costs, which can include regulatory and
exchange fees, legal services, insurance,
auditor work, and compensation for di-
rectors, she points out. For a private busi-
ness, "ultimately it's a question of whether
this is the right strategy for them," Gre-
wal says.
Aer all the caveats, for businesses own-
ers who aren't scared off, life starts to get
very busy.
PHOTO:
SHUTTERSTOCK
RAMAN GREWAL
>
STIKEMAN ELLIOTT LLP
"If you have a founder-led company,
part of what we'd say is, what are
your objectives? Yes, you have
access to markets and to greater
capital if you go public. But on the
other hand you have more flexibility
and greater control as a private
company if you don't. So part of the
exercise is, you have to weigh that."
