Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Junior Capital Pool (JCP)

What it is:

A junior capital pool is a Canadian entity that goes public before going into business.

How it works (Example):

Let's say Company XYZ has a new design for widgets. It has not produced anything beyond a prototype, and it needs capital to go into production. Accordingly, it establishes a junior capital pool, whereby the founders invest several hundred thousand dollars of their own money in order to make the company large enough to get a listing on the Toronto Stock Exchange and offer shares to the public.

Though Company XYZ plans to use the funds to lease factory space, hire employees and build an infrastructure, it does not have to detail the exact use of its funds to junior capital pool investors.

Why it Matters:

Junior capital pools are a way to raise money in Canada, typically for startups, and commonly in the oil and gas industry. The minimum investment is often $100,000, and it is a very risky investment due to the company's lack of proof that it can sell quality products and turn a profit.