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.
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