including the 12-g2b-3 exemption so important to Canadian juniors in overcoming the onerous SEC regs. I had also developed relationships with several market makers in the US over the years that were needed to sponsor the 15C-211 forms with FINRA for these Canadian juniors. 3. Why are so many Canadian junior mining companies now getting listed on the OTC QX? It has become clear that the QX offers something very intriguing to these juniors. The first is a very functional electronic marketplace that enables US investors to easily access the reported financials and see the current US marketplace in quoted by the market makers in real time in US dollars. Another virtue is the perceived advantage coming from the mandatory oversight function performed by the licensed PAL and DAD sponsors. This separates the QX brand from all other OTC markets. The other is the relative cost. The annual listing cost of just $15,000 for the QX is prohibitively less than any other global exchange. All of these features have enabled the Canadian junior resource sector to now become the dominant group of companies now trading on the OTC QX. 4. What is so special about the 12g3-2b exemption unique to Canadian issuers? The 12g-2bg3 exemption allows Canadian issuers to list on any OTC exchange in the US without the onerous expense, hassle and risk of becoming a US reporting issuer with the SEC via a 20-F or a 40F filing. It also allows Canadian firms to list in the US without conforming to US GAAP rules or the need to convert to the ADR format that is expensive and a hassle.
Sponsors- attorney PALS and Investment Bank PALS. Most companies on the QX today have used one of the attorney PALS to minimize their expense and separate the functionality of the services they are seeking. Each company must perform their own due diligence to vet the various sponsors. I use Merriman Capital as the sponsor for the companies I engage because they have sponsored so many QX listings and I have forged a great working relationship with their team. 8. What are some of the misconceptions that Canadian companies have regarding the OTC markets? One is the idea that SEC reporting is mandatory to list on the US markets. Another is that many Canadian issuers believe they already have a Pink Sheet listing but in fact it’s just a grey market ticker that is used only to designate shares bought on the TSX-V by US citizens. But perhaps the biggest is the importance of becoming “blue-skied” in the US so that market makers can quote their US shares and brokers can potentially solicit their US shares. This can enable more effective promotion of their shares to US investors but isn’t accomplished by any listing per se but instead by satisfying the public disclosure regs at the state and federal level. This is done through the filing of a 15C-211 form with FINRA and by securing S&P to handle the state blue-sky element.
7. Tell me about the firms that provide the oversight function to the QX- the PAL and DAD sponsors. Since most of the companies on the QX use PAL sponsors, I will limit my comments to those. There are two distinct PAL
9. How do Canadian issuers in the junior resource space get traction among US investors once they become dual listed on US OTC exchanges? Empirical evidence suggests that three things are needed for getting traction from US retail investors and brokers- a compelling story with a good news cycle forthcoming, the will and ability from management to promote their value proposition, and the satisfaction of federal and state blue-sky regulations that enable broker solicitation of their shares. Not all Canadian juniors meet this standard so the QX may not be ideal for all Canadian juniors. But many companies that
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have done all the above have benefitted very much from their QX listing. To support this, the QX has published case studies of several individual companies that have seen a sizeable increase in the volume and market valuation after they got listed on the OTC QX. 10. What is your outlook for the Canadian junior resource sector in the next few years? Amazingly, Canadian junior miners and even established producers are still trading at sizeable discounts to their enterprise value, book value, or free-cash flow. Given the exponential growth in world population and the sizeable increase in the middle-class of so many Asian countries the demand for resources is sure to remain elevated for years to come. This mega-trend should benefit the junior resource sector that is still much under-owned by the very large universe of US retail investors. n Peter Baxter is a registered representative with Moody Capital LLC and is based in Scottsdale, Arizona. Since 2006 he has helped over 100 Canadian junior mining companies get listed in the US primarily on the OTC QX exchange. He services these companies by consulting them on the regulatory issues related to cross-border listings and then expedites the US listing for them. After they get listed on the OTC QX he arranges non-deal road shows for them in several US markets with brokers and fund managers active in the junior resource space. Mr. Baxter has served in a wide variety of functions since entering the securities industry in 1986. He began at the larger firms and for ten years helped to groom institutional sales teams at the Atlanta offices of Lehman Brothers and Dean Witter Reynolds that developed substantial trading operations with European commercial banks. In 1995 he turned to corporate finance as an investment banker for numerous PIPE financings as Director of Corporate Finance for the Malachi Group, an Atlanta based boutique investment banking firm. In 2000 he formed Baxter Capital Advisors to brand his capital markets advisory services under the umbrella of another boutique in Moody Capital LLC. Peter was educated at Georgia State University and is licensed with Series 7 and 63 registrations.
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