The TSX Venture Exchange (TSXV) recently issued a bulletin providing guidance to issuers on the circumstances in which it will consider waiving its $0.05 minimum pricing requirements for a financing involving the issuance of shares of a company listed on the TSXV. While the TSXV maintains that it is not generally amenable to waiving the $0.05 minimum pricing requirement, it recognizes that in certain circumstances this minimum requirement may complicate an issuer's ability to conduct a financing. The TSXV has confirmed that it will consider waiver requests on a case-by-case basis, with the following circumstances being treated more favorably: (i) rights offerings; (ii) pending share consolidations; and (iii) other discretionary waivers satisfying certain criteria.
The TSXV is generally willing to waive the $0.05 minimum pricing requirement for a rights offering completed in accordance with the TSXV Policy 4.5 – Rights Offerings, subject still to the minimum exercise price of the rights being not less than $0.01 per share.
Pending Share Consolidation
The TSXV has acknowledged that, prior to conducting a financing, certain issuers may be required to complete a share consolidation in order to comply with the $0.05 minimum pricing requirement. However, completion of a share consolidation often requires shareholder approval which can cause delays or impede entirely an issuer's ability to conduct a financing in a timely manner. As a result of these timing concerns, the TSXV will generally allow an issuer to complete a financing at a price per share below the $0.05 minimum pricing requirement prior to the completion of the share consolidation in the following circumstances:
1. Issuance of Shares
A waiver of the $0.05 minimum pricing requirement to allow an issuer to complete a financing at a price of less than $0.05 per share (provided the price is not less than a 25% discount) would be considered by the TSXV if the completion of the share consolidation is both (i) certain to occur within a reasonable period of time following completion of the financing and (ii) will be conducted at a ratio that will result in the financing price being not less than $0.05 per share on a post-consolidation basis.
The TSXV has acknowledged that it will be satisfied that both criteria are met if the issuer can provide:
- written confirmation from shareholders holding at least 50% (or such lesser amount as may be acceptable to the TSXV) of the issuer's issued and outstanding shares that they will vote in favour of the proposed share consolidation;
- an undertaking to seek shareholder approval for the share consolidation by the earlier of the issuer's next annual general meeting and six months from the completion of the financing, and to give effect to the share consolidation as expeditiously as possible after receiving such shareholder approval; and
- disclosure to the public at both the announcement of the financing and at the closing of the financing that the issuer intends to complete the share consolidation.
2. Issuance of Special Warrants
A waiver of the $0.05 minimum pricing requirement to permit an issuer to complete a financing involving the issuance of special warrants at a price of less than $0.05 (but not less than a 25% discount) would be considered by the TSXV if the conversion of the special warrants into shares listed on the TSXV is conditional upon the completion of a share consolidation at a ratio that will result in the financing price being not less than $0.05 per share on a post-consolidation basis.
3. Issuance of Convertible Debentures
A waiver of the $0.05 minimum pricing requirement to permit an issuer to complete a financing involving the issuance of convertible debentures at a conversion price of less than $0.05 (but not less than the last closing price of the issuer's shares) would be considered by the TSXV if the ability to convert the debentures into shares is conditional upon the completion of a share consolidation and the corresponding post-consolidation adjustment to the conversion price results in it being not less than $0.05 in the first year of the term and not less than $0.10 in each subsequent year of the term.
In addition, the TSXV has confirmed that it would be amenable to waiving the $0.05 minimum pricing requirement in certain other circumstances. In particular, a request for a waiver would be considered more favourably by the TSXV if all of the following criteria were satisfied:
- the offering is made available to all of the issuer's existing shareholders to the extent the issuer is able to rely on the "existing shareholder exemption" contained in Multilateral CSA Notice 45-313 – Prospectus Exemption for Distributions to Existing Security Holders;
- the issuer is not listed on the NEX Board;
- upon completion of the financing the issuer satisfies all of the TSXV's applicable Tier 2 Continued Listing Requirements;
- the proposed offering price is not less than the last closing price of the issuer's shares prior to the announcement of the financing, subject to a $0.01 minimum and is protected by way of a news release;
- the financing involves the issuance of shares listed on the TSXV and not convertible securities, except for warrants with an exercise price of not less than $0.05;
- the aggregate gross proceeds of the financing does not exceed the greater of $500,000 and an amount equal to the offering price multiplied by the number of pre-financing issued and outstanding shares of the issuer;
- the proceeds of the offering will primarily be used to maintain or preserve the issuer's existing operations, activities and assets and will not be used to pay management fees; and
- disclosure to the public at both the announcement of the financing and the closing of the financing regarding the proposed used of proceeds, including any proposed payment to related parties.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2014