Q&A with Cboe Global Markets and Miller Thomson LLP

U.S. emerging growth companies face many challenges in today’s dynamic capital market when considering going public. One historic obstacle has been the limited number of national exchanges available, with companies usually choosing either the NYSE or NASDAQ. Many entrepreneurs may not be aware of other promising alternatives, such as a third national securities exchange.

With that in mind, Procopio Capital Markets and Securities practice group leader Christopher Tinen sat down with Cboe Global Markets’ Global Head of Corporate Listings Erik Sloane. Cboe is the second-largest ETF listing exchange in the U.S. and is focused on providing companies looking to go public an alternative to NYSE and NASDAQ. The company is also focused on cross-border opportunities in Canada, so Christopher brought into the conversation for further insights Corporate Partner Alexander Lalka from Miller Thomson LLP, a national business law firm with approximately 525 lawyers across 5 provinces in Canada.

Christopher Tinen (CT): Can you talk about how Cboe has now transitioned to a new business strategy to target (i) U.S. issuers as well as (ii) to expand issuer’s connections to your international exchanges (including the acquisition of the NEO in Canada, for example)?

Erik Sloane, Cboe (ES): Cboe’s roots trace back to the electronic options market, where it has maintained a leadership position for over five decades. In recent years, Cboe Global Markets (CBOE: CBOE) has been in acquisition mode with the strategy now in showing its benefit as investors in aspiring and already public companies around the world can now see a clear vision from a new part of our organization. This focus aims to redefine the traditional role of stock exchanges. We’re focused on attracting company listings, leveraging our global strengths as a stock market operator. We’ve long been in the listings business across regions such as the U.S., Canada, the UK, the EU, and Australia.

Cboe U.S. stands as the second-largest ETF listing exchange in the country., recently securing the majority of U.S. bitcoin funds from reputable names like ARK, Franklin Templeton, and others. Our expertise in listing and trading ETFs globally has enhanced Cboe’s position in trading and trade execution, attracting significant interest from liquidity providers and investment platforms. This expertise and global access is now being leveraged to provide unparalleled support to aspiring and existing public companies seeking more from their chosen stock exchange.

CT: Take us through your pitch to U.S.-based Issuers as to why they should consider Cboe when considering an IPO, uplist, dual list and/or a change from another national exchange in the U.S.?

ES: Our discussions with U.S. public companies have uncovered three recurring themes:

Firstly, global market access is increasingly appealing for companies seeking diverse shareholders, attractive valuations in specific industries or sectors, and new capital. Our global network offers opportunities for companies to list in multiple regions of the world seamlessly facilitating access to global investors.

Secondly, we streamline the listing process through pre-filing calls, identifying challenges early to ensure a smoother experience. Communication throughout the process aims to eliminate surprises, fostering transparency and efficiency.

Lastly, there is an incredible opportunity for Cboe as a global stock exchange provider to come into the U.S. and re-orient the go-public experience. We prioritize a service-first approach, offering a best-in-class service model backed by knowledgeable teams. As a trusted market operator, we’re committed to delivering on our promises predictably and transparently.

CT: We have seen the news that Cboe has completed some recent IPOs of U.S.-based issuers. Can you give us some insight into how those deals came together and who you think your target issuer is (company/deal size, industry, location (U.S.-based or international-based))?

ES: Our target market in the U.S. comprises purpose-driven, innovation-economy oriented businesses with market caps ranging from $100 million to $1 billion. This is where we’re spending our time as a team and as a business pursuing new listing opportunities, though already we’re starting to receive introductions to companies that would otherwise see these parameters expand as a result of complimentary offerings within our broader organization – think indices, options, and tokenized markets, and our global listing platform prime among them.

Cboe is a 1600+ person organization, with a fairly large contingent of our group focused on the stock trading business across technology, operations, and sales – and the world is a large place. The IPOs we’ve supported out to market today have come from partners well-versed in IPOs today – investment bankers, lawyers, auditors, investor relations firms, and those already in our network working with Cboe to list other products like ETFs, Depositary Receipts, or Structured Products today.

CT: And to follow on that, how does Cboe and its international network of exchanges maybe mitigate some of the issues with international issuers looking to dual or cross-list in the U.S. and can potentially leverage Cboe for that purpose?

ES: If you think about the current pathway for international companies to raise capital, they often have to pick a single exchange they’re going to list on. However, this is normally also motivated by which investment bank and their country of origin is interested and able to raise capital at an attractive valuation for the company and their current shareholders. In many of our discussions, the U.S. market remains top on that list whether it’s now or at some stage in the future as the company continues to scale their business.

For international companies seeking to list in the U.S., very often they’ve raised capital from shareholders in their home-country first to get them to the point where they’re ready for a go-public – those shareholders then have to find a way to open an international trading account if they don’t have one already to access some of liquidity available when the company goes public – this can be a difficult, and frustrating exercise for investors which, no surprise, then becomes a conversation with the company’s management team as they try to help solve shareholder access challenges.

Enter Cboe Global Markets – where a company can list on our Cboe U.S. exchange, and we will enable a local currency ticker on our other markets in the UK, Netherlands, and later this year in Australia so investors can trade in their home country / local currency.

We have seen the power of convenience at work in our Canadian markets bolstered by the explosive growth of Canadian Depositary Receipts (CDRs), built and backed by CIBC (one of Canada’s largest banks) proudly listed on Cboe Canada. These products make buying the most popular U.S. companies like Tesla, Google, Nvidia, Netflix and Amazon easier for Canadians – Local currency, fractional shares, and a built in FX hedge. In the span of 2.5yrs, CDRs now represent well over $4Bn in Canadian investor money into the U.S. economy.

CT: Are there any suggestions you have for potential issuers, as well as securities industry professionals (legal counsel, auditors, IR professionals, etc.) on how to best navigate a potential Cboe listing process?

ES: The best thing a company, or their advisors, can do is get in touch! The Cboe Global Listings team and I love to share our journey and mission, and we love to pitch and propose for new business around the world. We can be reached by email or feel free to visit us online.

As Cboe Global Markets grows its presence in the U.S. capital markets, its strategic maneuvers also cast a spotlight on the broader landscape of international exchanges. While one focus is on enhancing listing services for emerging growth companies in the U.S., the ripple effects extend beyond borders, particularly into the realm of Canadian capital markets. As such, the discussion naturally transitions to explore the implications of Cboe’s strategies on the Canadian financial ecosystem and the opportunities it presents for companies on both sides of the border.

CT: Tell us a bit about how you view the state of the capital markets in Canada and the deal flow you are seeing this year.

Alexander Lalka (AL): The state of the capital markets in Canada has been inconsistent in the last 12-18 months. We have seen some evidence that a robust market will return but generally the capital raising in Canada has been challenging. We are seeing much more activity in the M&A space, although transactions are taking longer to close given the difficulty in raising funds in this market. It will be interesting to see what happens if interest rates start to drop later this year as this may spark more investment activity in Canada.

CT: Can you take us through how you counsel Canadian clients looking to access the U.S. capital markets? What are some of the pitfalls to be worried about? What are the benefits from your perspective?

AL: The U.S. market is obviously a tremendous opportunity for many clients in Canada to access significant funds. It is such a larger market than ours and a significant source of capital. The key is to find the right advisors and brokers in the U.S. that believe in the client’s story and have potential to create future synergies. Often we are asked by our clients to connect them with the right team in the U.S. Compliance with U.S. securities laws can be onerous and technical so we always recommend our clients to engage with U.S. counsel if a financing touches the U.S. market. Although the upside with larger deals in the U.S. is attractive, going public in U.S. can be costly and involves significant ongoing reporting obligations.

CT: We’ve seen the emergence of the NEO exchange in Canada and subsequent acquisition by Cboe to form Cboe Canada. How do you see these changes impacting issuers on both sides of the border?

AL: I have been following NEO’s evolution closely and have acted on a number of listings. This development is a major opportunity for client’s that wish to access multiple markets. Being listed on Cboe in Canada will make it easier for clients to also list in the U.S. or on other foreign exchanges. It provides flexibility and greater reach in capital raising. There is also significant upside in building the client’s profile outside of Canada, and within Canada if a client is new to the Canadian market. I expect this trend of globalization of stock exchanges to continue as client’s are always looking for new and creative opportunities to raise capital.

CT: We’ve worked together on deals inbound to Canada to access various exchanges. What are some benefits for non-Canadian issuers accessing the Canadian public markets? Who are the ideal issuers in that scenario?

AL: Issuers that are domiciled in the U.S. (or in another non-Canadian jurisdiction) may see the benefits of going public in Canada given savings in cost and less burdensome requirements under securities laws, which makes a lot of sense for issuers in the mid-market range. A pivot to Canada is also beneficial for issuers that are in an industry that has been historically well financed in Canada. For example, our capital markets in Canada are heavily weighted in mining and exploration. Around 40% of the world’s public mining companies are listed on a Canadian exchange. Non-Canadian issuers that are looking to finance an exploration project (within Canada or otherwise) often seek financing in Canada, as Canada is the leader in that space.

Cboe’s strategic initiatives to enhance its listing services in the U.S. offer a promising outlook for emerging growth companies considering a move to public markets and an alternative to the existing national exchanges in the U.S. With a focus on streamlining processes, fostering international connections, and providing tailored support, Cboe is trying to serve as a catalyst for the success of these companies. As the global financial landscape evolves, Cboe’s focus on international reach presents an added benefit for both U.S. and international-based emerging growth companies looking to raise capital and obtain an exchange listing. Lastly, Cboe’s global strategy has the potential to enhance cross-border transactions amongst many jurisdictions, including Canada-U.S.

We at Procopio are monitoring Cboe’s progress and are intrigued by the introduction of a third player in the national exchange market here in the U.S. as well as its cross-border strengths given the range of cross-border transactions our corporate, securities and international tax lawyers see on a day-to-day basis.