Step II Preferred Equity Placement
A preferred equity offer is made to “sophisticated” investors, usually in the form of convertible, retractable non-voting preferred equity with dividend entitlements of 10 percent and more. An option may allow for the conversion of preferred equity to common equity.
Step III Formation of a Junior Capital Pool Issuer
This permits the venture to list its shares on a stock exchange; the most accommodating is the Alberta Stock Exchange. The venture raises seed capital from investors, completes a small public distribution of its shares and within 18 months must complete a major transaction.