By Zohar Barzilai - Securities and Capital Markets
What is a G-Corp™?
A new Canadian publicly-traded investment vehicle has entered the Canadian capital markets fray. The G-Corp™, or Growth Acquisition Corporation, currently in its pilot program phase, is an innovative solution designed by the NEO Exchange (“NEO”) to enable private, mid-market growth companies to access capital and go public in Canada with reduced risks.
Addressing a Gap in Canadian Capital Markets
The G-Corp™ attempts to address a gap in Canadian capital markets for acquisition corporations. For many years, venture exchanges have facilitated the capital pool company and reverse take-over route for junior companies. Meanwhile, special purpose acquisition corporations ("SPACs") are generally designed as go-public investment vehicles for larger growth companies. Enter the G-Corp™, an acquisition corporation designed for earlier stage companies that may not otherwise fit the criteria of the other public listing alternatives in Canada and are looking to list on a senior Canadian stock exchange.
Key Features of a G-Corp ™
According to the NEO, the G-Corp™ structure leverages the existing structure of the NEO’s SPAC program and involves a rigorous review process. However, the G-Corp™ structure includes some significant distinctions from the SPAC requirements, including the absence of the shareholder redemption feature ever-present with SPACs. Some of the key features of the G-Corp™ program include:
- Minimum IPO Proceeds and Escrow. A minimum initial public offering (“IPO”) of at least $2 million, 100% of which must be held in escrow.
- Limit on Founder’s Ownership. Founders’ equity ownership in the G-Corp™ of not more than 20% immediately following the closing of the IPO, excluding any securities purchased at or prior to the closing of the IPO at not less than the IPO price.
- Minimum Founder Investment. A minimum investment by the founders, ensuring at least $300,000 of free working capital.
- Qualifying Transaction Timeline. A Qualifying Transaction (“QT”) identified within 24 months, completed within 27 months.
- Market Cap Requirements. A resulting issuer that has a market capitalization of at least $30,000,000 and meets the NEO’s initial listing standards (senior issuer).
- No Shareholder Redemption. No redemption feature at the time of the QT, but the QT is subject to shareholder approval, excluding any holders of non-IPO securities.
- Return of Funds to Investors. In the event the G-Corp™ fails to complete a QT within the permitted time, the escrowed funds will be returned to the investors on a pro rata basis.
For more information or guidance for any business issues involving public companies and securities, please contact Andrew Elbaz, Zohar Barzilai, Alexander Katznelson, or Darren Nguyen in our Securities and Capital Markets Group.