Tuesday 23rd October 2018

Resource Clips


Deals without ordeal

Issuers and investors both benefit as Capiche revamps private placements

by Greg Klein

“There’s gotta be a better way to do this.”

That’s a refrain James Atherton heard frequently as the Vancouver-based securities lawyer led junior resource firms through private placements. Industry consensus held it to be a laborious ordeal that diverts time and money from enterprise while shutting out smaller investors. But with inspiration borne of frustration, Atherton teamed up with Corebox creator Jonathan Longe to “revamp, streamline and automate” the process, bringing these financings into the 21st century with Capiche.io.

Issuers and investors both benefit as Capiche revamps private placements

Atherton and Longe had previously collaborated as lawyer and client while the latter grew his Corebox business, providing software now widely used by mineral exploration companies to illustrate drill data. Solidly rooted in resources, the two talents complemented each other as they combined a detailed knowledge of private placements, extensive experience with the flawed process and high-tech insights on how to fix it.

“Capiche can be used by any company raising money on an exchange and we’re even doing our first private issuer,” Atherton points out. “We provide all the documentation from the news release announcing the offering to all the legal agreements, even all the post-closing files, which get prepared automatically for filing with regulators and the transfer agent. We certainly suggest issuers have their lawyers review the documents but now they’re not paying lawyers to re-invent the wheel every time. It’s automatically there.”

Leading a reporter through an online demo, he adds, “What I’ve shown you in 10 or 15 minutes could not be done in 20 or 30 hours. That’s how long it would take to prepare all those documents, so this is a huge game-changer.”

Besides saving money, “it gives the issuer the ability to hit financing windows. You’ve got good news in the market, the stock price is up, you want to start raising some money without waiting for lawyers to do their work.”

Issuers and investors both benefit as Capiche revamps private placements

James Atherton at VentureLabs, a Vancouver
project incubator used by Capiche.

It also opens doors for retail investors. In theory, regulators opened private placements to them about three years ago, provided the investors already held shares in the company. The new rules allow them to participate up to $15,000, and more under certain conditions. In practice, the cost and complexity of the traditional process rule out these relatively small purchases.

Consequently, loyal investors can miss out on an offering that often comes at a discount to market and with a warrant sweetener. “I’ve been one of those people who’ve purchased in the market then a private placement happens two weeks later. So if you’re not included, you feel slighted. The real value of the platform will be to reach even greater numbers of people.

“Ours is a one-time fee so we don’t charge more for the amount raised or the number of subscribers. Any money is good money but, more importantly, these small investors are the people who read company websites and talk up projects on the chat rooms and bullboards. They’re the ones who buy and sell, providing liquidity.”

Capiche both opens the process to retail investors and guides them through it, Atherton says. “When people don’t know where to sign or what to fill out, there tends to be a lot of back and forth between the issuer and the subscriber, and people get very frustrated. We’ve solved that for the investor but it’s really for the issuer that we’re providing value.”

At both the issuer and investor interfaces, Capiche provides clickable pop-ups that offer more details and definitions about the questions, such as explanations of exchange policy and relevant law, to help users fill out the forms.

Once an issuer has entered all the info and announced the offering, the company can use the site to send investors an invitation. Recipients can read the terms and, if they’re interested, click through to subscribe.

Since its introduction late last year, Capiche has handled four private placements for separate TSXV companies that closed on a total of just over $7 million. Two more were in progress at ResourceClips.com press time, one with a private issuer and the highest offering so far. “Additional companies are in the pipeline, so there’ll be more to announce in the next week or so.”

We regard it as fully compliant high-end work but it’s a quarter of what you’d pay an equivalent lawyer. Even if you’re just using a corporate secretary or corporate services firm, Capiche is still going to be cheaper.—James Atherton

Competing concepts have surfaced but Atherton maintains that Capiche stands out for sophistication, thoroughness and efficiency, at an initial price of $7,500 per transaction. “Others are coming to market, but nothing we’ve seen compares with what we’ve created,” he says.

“We regard it as fully compliant high-end work but it’s a quarter of what you’d pay an equivalent lawyer. Even if you’re just using a corporate secretary or corporate services firm, Capiche is still going to be cheaper. And you get compliance insured with us which typically you wouldn’t get with a non-lawyer. That being said, we’re not providing legal advice. All the documentation is automated but it’s really best practices and all the documents are state of the art.”

Companies can get discounts for more than one transaction a year, while umbrella groups can qualify for a volume discount, he adds.

Given the background of Atherton and Longe in the world capital of junior mining, resource firms naturally comprise their target clientele. But they see further potential with initial coin offerings and initial token offerings.

Reflecting on the process, Atherton says, “We’re not looking to displace lawyers entirely. But they shouldn’t be doing this ordinary routine work. Our view is lawyers should oversee the process but also be available for the higher-value work.”

Learn more about Capiche here.


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