IPO drought? Cleantech companies flood Canadian markets (page 2)

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How are you seeing new cleantech companies take advantage of the exchanges?

The majority of cleantech companies accessing one of our two exchanges are using the reverse takeover route, which is usually accompanied by a concurrent financing by way of private placement.

Reverse mergers usually allow you to go public in a way where you are not forced to dilute yourself and raise large amounts of capital. They are more controlled because you are negotiating with the board of the shell company.

This kind of financing is being done through a variety of funding sources, but the majority is being done by investment banks that are participating organizations of TMX Group. They tend to be earlier stage companies, often pre-revenue or early-stage revenue companies that are looking to raise between $2 million and $50 million. Not that we don't do business with smaller and larger cleantech customers, but the bulk of our customers fit the previous description.

Recent U.S. deals that have listed include Manassas, Va.-based Catch the Wind (TSX-V: CTW.S), which is a U.S.-based laser wind sensor developer that went public by raising $17 million in October 2008, and Lonestar Capital, a California-based solar installation company that recently changed its name to Acro Energy Technologies (TSX-V:ART).

[Last week, Catch the Wind also completed a private placement of 16.7 million common shares, generating gross proceeds of C$21.8 million ($20.1 million). The net proceeds are to be used to further develop and manufacture products including its Vindicator laser wind sensor (see Cash-strapped cleantech firms seek cure in common stock).]

We have a variety of issuers that are well regarded from the solar space, power grid effieciency companies, as well as a very vibrant transporation sector which includes a Toronto-based electric vehicle company called Zenn Motor (TSX-V:ZNN), which currently has a market capitalization of over $165 million.

[The company’s CEO Ian Clifford recently spoke to the Cleantech Group about Zenn’s plans to incorporate ultracapacitors into its highway-speed electric vehicles starting in 2010 (see Zenn CEO reveals details of EEStor's progress).]

What makes the exchanges an idea marketplace for small- to mid-cap IPOs, and how many exits have there been recently?

We are not promoting an "exit mentality" for the majority of our cleantech companies unless they are senior in nature or have very large valuations and business metrics. As our rules, policies and financing ecosystem is tailored to small to medium enterprises, we often have clients using our branded reverse merger product called the Capital Pool program as well as traditional IPOs, reverse takeovers and dual listings.

During 2007 and 2008, we added 30 new listings to our cleantech family of companies. Due to market conditions in 2009, we have only three new cleantech listings, however more than 11 companies are in the application stages.

Which cleantech companies have graduated to the senior exchange, TSX, and why were they able to graduate?

There were 42 issuers on the senior market and 72 on the junior as of April 30, 2009. While I do not have graduation statistics on hand, generally, across all sectors, the TSXV graduate program accounts for between 20 percent and 30 percent of the TSX’s new listings each year.

What are the reasons you are seeing cleantech companies use the exchanges?

Capital, liquidity, valuation, analyst coverage, a merger and acquisition platform, and credibility.

How does your exchange differ from others cleantech companies may be pursuing?

Leading edge and diverse cleantech companies want to be associated with an ecosystem of knowledgeable and engaged investment banking, legal and analyst coverage in the space. Case in point would be Canadian Hydro Developers (TSX:KHD), which has more than 15 analysts covering its stock.

But there are examples of smaller market cap companies like Carmanah Technologies (TSX:CMH) a solar LED lighting company that has a market cap below $50 million but has eight analysts covering its stock. This is a credit to both Carmanah and Canadian Hydro Developers’ investor relations efforts, but it is difficult to imagine companies of this size enjoying this level of analyst coverage anywhere else in the world.

Do you have any advice for cleantech companies out there looking for funding, on your exchanges or elsewhere?

Do your homework; assess your options; consult your advisers (both financial and legal); speak to us and have a pre-filing exploratory meeting. Within the TMX Group, Rob Peterman is the senior manager of global clean technology and can be reached at robert.peterman@tsx.com.

How will the two exchanges continue to be options going forward for cleantech companies?

We have well over a century of experience in small- and medium-size companies in resources, technology and now cleantech. We will continue to stay close to our customers' needs and ensure that we provide a leading edge service.

The main message we have been saying in the United States is: We’re experts at this. We’re experts in small- to medium-sized private enterprise companies.

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