SGS 5 (Secondary Share Issue) Flashcards
What is a placing?
Marketing of securities to specified persons of the sponsor which does NOT involve an offer to the public OR to existing shareholders.
What is a rights issue?
Offer of new shares to existing shareholders pro rata to their existing shareholdings
What is an open offer and how does it differ to a rights issue?
Offer of new shares to existing shareholders pro rata to existing shareholdings but (in contrast to rights issue) not made by way of renounceable letter.
Which type of offer generally does not require a prospectus and why?
A placing
Qualified investor exception to test 1
PR 1.2.3A exception to Test 2. (max disapplication of PERs is 10% which is still below the 20% threshold)
Both a rights issue and open offer require a circular, prospectus and GM notice (if required) to be submitted to SHs. Which is the document which differs?
PAL for rights issue (tradeable document showing entitlement to new shares, can only send once conditions to rights issue have been satisfied)
Application Form for open offer (not tradeable so no need to wait until after GM held)
What is the difference for length of offer periods for rights issues and open offers?
R: 10 business days cannot run concurrently with GM notice period as runs from date NPRs are admitted to trading (which is the day after the GM)
O: 10 working days can run concurrently with GM notice period (not made by way of renounceable letter so application form can be posted on impact day even if a GM is required.)
Both – close 11th business day after impact day.
What are the options available to shareholders under a rights issue?
Take up rights
Sell rights (renounce in favour of another investor)
Let rights lapse
Combination
What options are available to open offer shareholders?
Non-tradeable application form so either purchase shares or allow offer to lapse.
What happens under a rights issues when shares are not taken up?
Listed co must make arrangements with underwriter who sells ‘rump’ within 2 working days of end of issue acceptance period.
Any leftover ‘stick’ shares will be purchased by underwriter.
Any premium received on sale will pass to the existing SH
What happens in open offers and placings where shares not sold?
If issue underwritten, underwriter takes up any unsold shares.
Why does placing generally only raise small amounts of finance?
Authority to allot is up to 1/3 but limits on disapplication of PERs are also required.
PERs in relation to a placing?
5% ISC in one year
Additional 5% in connection with acquisition or specified capital investment.
In any rolling 3-year period, company should not issue shares for cash pursuant to general disapplication representing more than 7.5% ISC.
A rights offer is fully pre-emptive so why do companies disapply pre-emption rights?
Excludes certain overseas SHs (expensive to comply with onerous securities laws in certain jurisdictions)
Allows listed cos to combine fractional entitlements into whole shares and sell those that result on the market.
What is the GM notice period?
21 clear days for a traded company, but may be reduced to 14 if conditions in ss. 307(1)(a) and 360(1) apply.
Not an AGM
Facility enabling She to vote electronically provided
SH pass SR every year at AGM approving shorter notice period.
What is the purpose of Resolution 9A?
For a pre-emptive offer, allows disapplication of pre-emption rights up to authority to allot.
