4. Secondary Share Issue Flashcards
What happens day after RI offer closing
Announcement to RIS
Two methods of making RI
Gazette Route and Disapplication Route
When is UW agreement dated for secondary share issues
Eve of admission - as for flotation
What happens in right issue if not all shares sold
Lead UW instructs broker to sell rump, and then if not sold, lead UW purchases stick
When is authority for secondary share issues usually acquired
At AGMs - anticipating need
What is the nature of application form for OO - tradeable?
Non-renounceable
What does company receive if M lets rights lapse in RI and broker sells on M’s behalf
Rights issue price - M receives premium on top
When is there a step to take before impact day - what kind of SSI
Placing
Four options for Ms in rights issue
Take up rights, sell rights, let rights lapse and a combination
2 principal reasons why pre-emption rights disapplied
Overseas Ms + fractional entitlements
By when must stick be sold for rights issue
5 WD
What do overseas Ms receive when pre-emption rights disapplied for them
Premium
What is used for open offers instead of PAL
Application form
What additional restriction does PEG put on placing in terms of percentages over years
7.5% for general in 3-year rolling period
When are CREST accounts credited for RI
Usually day 1 of offer period
SCM Guidelines on authority to allot for placing
1/3
When is GM notice period shortened + what resolution
At AGM - by SR
PEG on disapplication of pre-emption for placing
5% generally + 5% additional for acquisition/specified capital investment
Is a GM required if within current authority
No
Two provisions on AGM notice period
307A(1)(b) + 360(1)
What is a rights issue
Offer to existing Ms to subscribe for shares in proportion to existing holding via PALs
Two kinds of business dealt w/ at AGM
Special and ordinary
What kind of companies does 307A apply to
‘Traded’ - MM, not AIM
When must the sale of fractional entitlements and overseas Ms’ shares be done by in RI
Closing of offer
What LR provision gives 2 principal reasons why pre-emption rights disapplied
LR 9.3.12R(2)
SCM Guidelines on authority to allot for OO
1/3 of ISC
What is a PAL and what does it mean
Used to trade rights to shares before they are issued
What is the issue of pre-emption rights for overseas Ms
Need to comply w/ other Js’ securities laws and costly to follow Gazette Route
Pre-impact day steps for placing
Obtain indications of interest
What wording excludes pre-emption rights for overseas Ms
Excluding ‘legal and practical problems’
Member res required to disapply 561 pre-emption rights
SR
What is ‘tail swallowing’
In RI when M sells part of rights to buy remainder
Why do a secondary share issue?
To raise money for C
Do SCM and PEG have legal force?
No
If Gazette route, how must offer be sent
Hard copy/electronically
How long can RIS announcement after RI offer closing be delayed by if UW
2 BD, until rump sold
What is an open offer
Offer to existing Ms to purchase shares in proportion to holdings, but not by PAL
When is UW agreement signed for secondary share issues
As for flotation - day before impact day
Why is prospectus likely for RI
85(1) can’t be restricted to institutional, and 85(2) bc likely more than 20%
For what SSIs can GM notice period be folded into offer period
OO and placing
What is the discount on an open offer restricted to
10%
If using both general and additional allowance for placing under PEG, same or separate resolutions
Separate
Provision on last date for acceptance of RI
LR 9.5.6R
What happens if Ms let their rights lapse in a rights issue
Broker will sell + pay any premium to M
Which pre-emption issue does not use PAL
Open offer
What is discount of placing shares actually limited to
5%
What are pre-emptive issues
Share issued to existing Ms in proportion to shares currently held
For what SSI is prospectus unlikely
Placing
What are the two pre-emptive issues
Rights and open offer
When is there no restriction on discount for both placing and OO
M approval or 570 authority
Provision on announcement to RIS day after RI offer closes
LR 9.5.5R(2)
What pre-emptive issue is usually underwritten
Rights issue
SCM Guidelines on authority to allot for RI at AGM
2/3 of initial share capital
What limits discount of placing shares to 5%
PEG part 2B
What happens if M has no reg address in EEA for Gazette Route
Publish in London Gazette
Why can’t GM notice period run w/ offer in RI
Bc PALs are nil paid rights - traceable securities
How many BDs in total for RI - time for acceptance
11
Why is it unlikely RIS announcement can be delayed for 2BD for placing + OO
No rump
How are 10 BD before issue counted for prospectus
Clear days - per FCA
What is the discount restricted to for placing according to LRs
10%
When does trading in NPR start
Admission day
What defines a rights issue
LR APP 1
What CA provision for authority to allot
551
When are PALs sent to Ms if GM required for RI
After GM held + authority obtained
What is the only difference in RI on impact day if there is no GM required compared to if GM required
If no GM, PALs sent out on impact day
What is the influence of SCM + PEG
Ms likely to vote against res if not followed
What happens if OO and M lets offer lapse
Usually no selling arrangement for broker to sell on M’s behalf
What does the company receive when overseas Ms have their rights disapplied in pre-emption
RI price
What PR provision states prospectus if share issue of more than 20%
PR 1.2.3A
Is there a minimum offer period for placing
No
For which SSI is there no minimum offer period
Placing
In what secondary share issue is a PAL used
Rights issue
When is the last date for acceptance of RI
10 BD after Impact Day
By when must the rump be sold for rights issue
2 WD
CA provision requiring AGM to be held
336(1)
SCM Guidelines on disapplication of pre-emption rights for RI at AGM
2/3 of initial share capital
Why is prospectus unlikely for placing
85(1) to institutional investors + 85(2) unlikely more than 20%
What usually happens for notice period of GMs of LisC + provision
Reduced to 14 at every AGM - permitted under 307A(4)
What is ‘special’ business?
Authorisations for potential future issues
What is the effect on existing Ms of placing
Dilutes existing Ms’ shareholdings
How do buyers confirm purchase for placing
Sign Placing Letter
Why is GM usually held after offer period, if the two can run together
Notice period usually longer than offer period
LR provision for pre-emption rights
LR 9.3.11R
When can announcement to RIS after RI offer closing be delayed
If underwritten
Why can GM notice period run concurrently with offer in OO
Application form is non-renounceable
How do Ms sell rights in rights issue
Renounce in favour of broker (‘nil paid dealing’
CA provisions for Disapplication Route
570 + 571
What guidelines apply for authority to allot + disapplication for both pre-emptive offers
SCM Guidelines
What issue do Ms prefer and why
Rights issue as can benefit even if lazy
What happens for pre-emption rights being excluded for fractional entitlements
Fractional entitlements sold to other Ms
When is circular sent to Ms in RI
On impact day
SCM Guidelines on authority to allot for placing
1/3
To what two types of secondary share issues do Gazette and Disapplication apply to
OO and RI
How is impact day different for OO compared to RI
Application form sent to Ms both if GM required and if not
Under what CA provision if Gazette Route
562
What is a placing defined as
Shares marketed to specific persons, client of sponsor or securities house
What parts of CADNB rarely apply for SSIs and why
C (few LisCs have caps) and N (usually new OSs issued so not new)
What is the trend of discounting for rights issues
Heavily discount, e.g. 60%
CA provision for pre-emption rights
561
How do Ms take up rights in rights issue
Send back acceptance form in PAL/instruction through CREST
What is the period for GMs of LisC per CA (if no SR passed)
21 CDs
Time to publish RI offer in London Gazette
Not less than 14 days
What is the non-pre-emptive issue
Placing
What is in circular for RI
Reasons for RI, Ts&Cs
Is there a limit on possible discount for rights issue
No
What are the rights contained in a PAL called
Nil paid rights
Downside of secondary share issue (for Ms)
Risk diluting shareholding
Two options for Ms in OO
Take up offer and let offer lapse
Who must announcement of RI be made to and per what provision
RIS per LR 9.5.5R(1)
SCM Guidelines for disapplication of pre-emption for OO
1/3
When must prospectus be submitted for secondary share issues
10 BD before intended approval
Notice period for AGM
21 clear days
What LR provision states what happens when pre-emption rights disapplied depending on value of fractional entitlement
LR 9.5.13
Under what provision does it state that if M lets rights lapse in rights issue, broker will sell and pay premium to M
LR 9.5.4R
When is the discount on an open offer not restricted, and provision
If specifically approved by Ms or 570 disapplication - LR 9.5.10R
If pre-emptive issue at ratio 1:3, what does that mean
1 share issued for every 3 held
What document is sent on impact day for placing
Placing letter
Provision restricting placing discount to 10%
LR 9.5.10R
What does ‘impact day’ mean?
Date listing announced to the market
Why is there a step to take before impact day in placing
Need to find price + number of investors interested - unlike for pre-emptive where it is to existing Ms
If no GM is required, when is Admission + credit CREST after Impact Day
Day after
When must prospectus be sent out if required
On Impact Day
What kind of discount would be called deeply discounted for rights issue
60%
What does PEG only apply to
Disapplication of pre-emption rights
