In Canada, the IPO process is very deliberate as it involves the preparation and delivery of two documents to the security regulators. These are the preliminary prospectus and the final prospectus. The first step in the process comes in the drafting phase.
The drafting process incorporates input from a multitude of parties and this process can take potentially weeks to complete. Members of management such as the CEO and COO are usually involved in the description-writing process and making provisions for financial data to be included in the prospectus. The preliminary prospectus has all of the disclosures that will also be present in the final prospectus. The only exception to his is the price and the number of shares that will be issued. All of this varies on the timing of the final prospectus, and potential updates to the financial portion that may need to be updated.
Preliminary and final prospectuses can also be divided into two more sub-categories, being long-form and short-form. The long-form prospectuses incorporate the financial statements in the body of the document and used if the company in question does not have current financial statements at their disposal. Whereas short-form prospectuses are used for issuers that already have independent statements and other pertinent financial documents that have already been filed.
Then, underwriters and lawyers work together and organize a group that will have representation from management, company lawyers and auditors. This conglomerate will meet, usually correspond via email and have conference calls in order to get the framework of the document in place. Prospectuses and precedents will be shared, and they will be used as examples of what appropriate disclosures look like.
In terms of what is in a prospectus itself, there are required non-financial and financial information that should be incorporated. The non-financial information that is involved typically incorporate the business of the company, use of proceeds, executive compensation, audit committees, and risk factors. Required financial information involve pricing, regulatory review and the underwriter due diligence process.
For any director or executive officer of the company, the individual’s name, position, country of residence, occupation, the percentage of securities of each class and periods where each director has served (along with the expiration date) is required.
This is a basic framework process of an IPO in Canada.