Trends in Corporate Finance
I recently chaired a panel on ‘Trends in Corporate Finance’ at the USLAW/TELFA Network cross-border business and transactions conference. Five panelists from Switzerland, USA, Brazil, China and England shared their insights on what’s attracting investment and how technology is influencing financing and its regulation.
From the discussion, three distinct global trends in corporate finance emerged. They were:
1 – FinTech
Using technology to disrupt how financial services are delivered is a major area of growth and investment. The barriers to entry are being removed and many new players are entering the market to challenge traditional products and services. Well-known examples of FinTech include Apple Pay, PayPal and Square, but the applications of FinTech extend far beyond the end consumer. Over the past year, FinTech innovations that allowed for financial services disruption — including mobile phones, cloud computing and peer-to-peer networks — have combined with newer technologies, such as blockchain, machine learning and artificial intelligence such that FinTech has become the focus of both start-up companies and large, existing, technology companies.
The governments of several countries, including Switzerland, Australia and the UK, are leading the push for innovation in this area. Canada, however has lacked leadership in putting together a national FinTech strategy to both push investment in the area and foster innovation. The response has been for large Canadian companies and wealthy families, such as Power Financial Corp., the Desmarais family and the Holt family setting up incubators and accelerators and investing in Fintech companies directly. As a result, Montreal is now seen as a leading centre for FinTech incubation and investment.
The rise of FinTech is having an impact on how funds are raised in corporate finance, how those funds are traded and what startup companies have access to in terms of startup capital. The pace of change in this area is also proving to be a challenge for regulators as they try to keep pace with technological innovation in the industry.
The good news for startups is that there are now more flexible lending options if they can show that they can compete and disrupt traditional industries and service models.
#2 – Digital Currency
Digital currency is often considered a subset of the larger umbrella of FinTech but the panel considered digital currency on its own, given the very recent developments in Switzerland and the number of Initial Coin Offerings (ICO’s) that have occurred over the past few years. ICO’s, despite issues of fraud and securities law issues, have become a source of capital for startup companies with billions of dollars raised in the first half of 2018.
Recognizing the future potential of cryptocurrencies, Switzerland has officially positioned itself as a world leader in the regulation and trading of digital currency and digital assets. In July, the Switzerland’s Stock Exchange (SIX) became the first market infrastructure in the world to offer a fully integrated end to end trading, settlement and custody service for digital assets. Despite Bitcoin’s recent depletion in value and the risk inherent to these kinds of investments, speculators and investors with risk appetite are leveraging the relative low regulation surrounding digital currencies and assets to fund technology companies that may otherwise not have access to startup capital.
#3 – Cannabis
Canada may be leading the world on the legalization of recreational cannabis, but the impact is reaching well beyond our borders, as evidenced by the recent soaring value of cannabis companies such as Tilray Inc. on the NASDAQ exchange. Jonathan Stroper of Hanson Bridgett LLP in California spoke about the trend of Canadian companies investing in California as evidence of the growing cross-border nature of the cannabis industry. I fully agreed with his sentiments based on recent transactions I’ve been involved with. Typically, these investments see Canadian cannabis companies, with either Canadian or US-based capital, purchasing significant assets in California and then listing on the Canadian Securities Exchange (CSE).
The CSE is emerging as a hotbed for cannabis company listings and funding, as evidenced by the billionaire family behind American Eagle Outfitters completing a listing via reverse take-over in July. As the march toward legalization on October 17 of this year continues, the pace of investment in cannabis companies and assets is at an all-time high.
My thanks to the panelist for sharing their insights on trends in corporate finance from their country.
Meyerlustenberger Lachenal (Switzerland)
Hanson Bridgett LLP (California)
Rodolpho de O. F. Protasio
Mundie e Advogados (Brazil)
Duan & Duan (China)
Wedlake Bell LLP (England & Wales)
USLAW is an international organization composed of more than 60 independent, full practice firms, including more than 6,000 attorneys across the U.S., Canada, Latin America and Asia, and with affiliations in Africa and with the Trans-European Law Firm Alliance (TELFA), a network of over 30 independent law firms in Europe representing more than 1,000 lawyers.
Kelly Santini LLP