On April 12 2019,  the Toronto Stock Exchange (TSX) published its latest guidance on the TSX Sandbox, TSX Staff Notice 2019-0002 (the Staff Notice).

The Toronto Stock Exchange created the TSX Sandbox to facilitate listing applications that ordinarily would not satisfy the requirements and guidelines of TSX, but due to facts or situations unique to a particular issuer may otherwise warrant a listing on TSX or an exemption from certain requirements in the TSX Company Manual (the Manual).

TSX staff advise that applications to the Sandbox should by no means be considered as establishing precedents for future applications to the Sandbox. All applications will be reviewed by TSX staff on a case-by-case basis. Additionally, staff will also continue to deal with those standard applications that might require regulatory relief in the ordinary course of business.

The TSX Sandbox is open to applicants from all industry sectors from early-stage companies to those who are more seasoned. The Sandbox is also open to existing TSX-listed issuers who wish to pursue novel financing, including equity, debt, structured products, and other securities.

The eligibility requirements, principally for new corporate or supplemental listings, include, but are not limited to the following considerations:

  • The experience level of the management team, and whether the board of directors and other supporters has a demonstrated track record in public markets;  A significant public raise resulting in a wide distribution of the applicant’s securities.
  • Size of the application’s market capitalization and significant pre-tax cash flow from operations;
  • Incorporation in Canada or in a jurisdiction with corporate governance practices comparable to Canadian standards;
  • The existence of a long-form prospectus recently receipted by a member of the Canadian Securities Administrators (CSA) or a U.S. registration statement recently made effective through a Securities and Exchange Commission (SEC) filing;
  • Sponsorship by a TSX participating organization or commentary and support from another entity with recognizable sector-specific expertise;
  • Evidence of wide public support and investor interest; and,
  • Established corporate governance practices.

Certain conditions, however, advise TSX staff, may make an application ineligible for the TSX Sandbox. These include, but are not limited to:

  • ongoing regulatory or historical sanctions or investigations;
  • emerging market issuers;
  • unfavorable regulatory or media information regarding the applicant, its management, or board members; and,
  • those applicants and listed issuers who have previously applied through TSX’s standard procedures, unless invited to apply to the Sandbox by TSX staff.

Given that TSX Sandbox applications would not generally satisfy listing requirements, TSX staff note that they may apply additional conditions in order to facilitate a listing on a one-off basis. Such conditions may include, but are not limited to:

  • Enhanced disclosure requirements;
  • Impositions of a minimum public raise and/or a minimum market capitalization; and,
  • Enhanced sponsorship or “expertised support” in the form of a report to TSX.

As the TSX Sandbox is intended to be a proving ground for policy initiatives that might ordinarily develop over a longer term, TSX staff advise that they will continue to provide further updates and guidance through additional Staff Notices as necessary.

The complete TSX Staff Notice 2019-0002 can be found on the website of the Toronto Stock Exchange.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.