A working group has presented suggestions for boosting Quebec’s flagging IPO ecosystem.
Rebuilding the ecosystem of initial public offerings would spur faster business growth and help Quebec companies compete in global markets, according to a report from the Working Group on the Shortage of Publicly Traded Quebec Companies
“While Quebec's economic weight in Canada is around 20%, Quebec companies account for only 7% of publicly traded companies, and that percentage is constantly declining,” said Claude Désy, a partner withDunton Rainville, creator of the working group and co-chair of the group's Coordination Committee. “Initial public offerings are a powerful tool for economic development. Bear in mind that the big names of today such as CGI, Couche-Tard, Cascades, Jean Coutu, Metro and Saputo all took advantage of IPOs at different stages in their development.”
“A number of factors have contributed to the gradual weakening of the IPO ecosystem for our SMEs in Québec. These days, they seem to be cutting themselves off from a key financing tool,” said Sylvain Vincent, a partner at EY and co-chair of the working group's Coordination Committee. “The advantages of IPOs go far beyond simply supplying the capital needed to grow our SMEs. Québec society as a whole can derive huge benefits, such as the establishment and retention of head offices, job creation and the development and retention of expertise here in Québec.”
The group made 10 recommendations to strengthen Quebec’s small and medium-sized enterprises (SMEs):
Enhance the visibility of public SMEs
Drive demand and liquidity through investor incentives
||Create a website dedicated to listed Québec companies together with a sponsorship network.
||Invite institutional investors to introduce a commission system as an incentive to public SME analysts established in Québec.
||Adopt tax measures to encourage the hiring of analysts based in Québec and specializing in the public SME market.
Increase the supply of capital from enterprises and simplify governance for them
||Introduce a new simplified plan for public SMEs similar to the stock savings plan and invite the tax-advantaged funds to support them.
||Defer capital gains if the gain is reinvested in a Québec public SME.
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||Have the TMX Group and other market players set a target of 20% of listings originating from Québec.
||Amend the Taxation Act so that a company and its shareholders retain their tax advantages once the company goes public (for instance, transfer and R&D tax credits).
||Provide financial assistance for listing.
||Under the leadership of the Autorité des marchés financiers, simplify and relax the regulatory framework applicable to public SMEs.
||Simplify the accounting requirements for public SMEs.