Joseph Vigneault & The capital pool company program

Joseph Vigneault and his entrepreneurial partners wanted to raise $500,000 to pursue a new venture through the purchase of a currently existing company in the $4,000,000-5,000,000 price range. A boutique investment bank introduced them to the features of the Capital Pool Company (CPC) program. Vigneault needed to decide if a CPC was an option that he and his partners should consider. He needed to consider the effect on their ownership stake in the company and calculate the return on their investment.
Learning Objective:
This case is focused on the quantitative and qualitative decision factors that go into deciding how to finance a new business venture. It exposes students to the unique CPC program offered by the TSX Venture Exchange in Canada. They will learn the steps required to set up a CPC, how a CPC raises capital and completes an initial public offering, how it purchases a business, and how the CPC becomes a regular TSX-V-listed stock. Students are given the opportunity to analyze a potential deal by entrepreneurs using the CPC program and calculate the share dilution and returns for entrepreneurs.
[Extract]
It was April 2009, and Joseph Vigneault of Trois-Riviers, Quebec, had just returned from a trip to Toronto. Vigneault and his two partners had recently completed the sale of a business they had successfully operated for many years. The group, being of the entrepreneurial mindset and having extensive business experience, was searching for new business opportunities and was looking to raise capital to pursue the purchase of a business: their goal was to raise $500,000. Vigneault, who had travelled to Toronto on behalf of the group, met with all of the major investment banks and a number of boutique firms on his trip. The major investment banks showed little interest in assisting the group, as the amount of capital they were seeking to raise was not significant enough. The reception at one boutique investment bank, however, had been quite different: they believed that Vigneault and his partners had some promising leads, and suggested that a Capital Pool Company (CPC) could be a viable option for them to raise capital. The bankers continued by explaining the features of a CPC and how they operated. Vigneault was intrigued by the concept and now had to decide if a CPC would be a good option to pursue.