THE “ALT UNDERWRITE” financing... · 2018-02-11 · THE “ALT UNDERWRITE” Equity Financing...
Transcript of THE “ALT UNDERWRITE” financing... · 2018-02-11 · THE “ALT UNDERWRITE” Equity Financing...
THE “ALT UNDERWRITE” Equity Financing Alternatives for Public Companies in the United States
Adam M. Klein Partner, International Corporate Department Goldfarb Seligman & Co. December 12, 2016
Topics
Underwritten Public Offering
Shelf Prospectus
At-the-market (ATM) Offering
Equity Line of Credit
Private Investment in Public Equity (PIPE)
Registered Direct Offering
Rights Offering
Factors
Length of process
Market risk
Management attention
Transaction costs
Pricing
Other terms
Market impact
Underwritten Public Offering
Prospectus
Due diligence
SEC review
Road show
Price and sign underwriting agreement
Closing, with legal opinions and comfort letter
Could take up to six months
Optimal price and terms
Low market impact
Shelf Prospectus – Set-up
Approved by SEC with no particular terms
Could include shares, warrants, debt, units
Incorporates other SEC filings by reference
Conditions for Form F-3:
Public for at least one year
Timely SEC filings in last 12 months
No material debt defaults in current fiscal year
Public float of at least $75 million
Subject to certain exceptions
Eliminates market risk
Shelf Prospectus – Take-down
File prospectus supplement with offering terms
Not subject to SEC review
Multiple uses:
Pro supp could be 1 page or 100+ pages
Traditional public offering
Overnight “bought” deal
ATM offering
Equity line of credit
Registered direct
Rights offering
WKSI ($700m public float) can go effective immediately
At-the-market Offering – Set-up
Sign distribution agreement with sales agent
File prospectus supplement with parameters
Company has right to sell shares on the market, via the sales agent, from time to time
Ordinary brokerage transactions
Pricing depends on prevailing market price
Sales agent has underwriter liability
ATM – Take-downs
Company delivers notice to the sales agent:
Number of shares or total proceeds
Selling period
Minimum price
Each sale small and doesn’t depress market
No sales if company has material inside info
Company reports aggregate sales quarterly
No road show or negotiation with investors
Minimal market risk
Optimal pricing
Equity Line of Credit
Company signs Standby Equity Purchase Agreement (SEPA) with investor
Entitles company to put shares to investor from time to time upon 5 trading days’ notice
Issue price is at discount to lowest average daily price during notice period
Shares issued pursuant to shelf prospectus
Investors immediately sells short and covers short with the newly issued shares
Could help alleviate liquidity crunch
Negative market perception
PIPE – Private Investment in Public Equity
Private placement to select investors
Investors often receive shares and warrants
Could use placement agent/memo
Shares are “restricted” from resale
Company agrees to register resale with SEC on secondary shelf prospectus
Issuing more than 20% of outstanding shares could require shareholder approval
PIPE – Pros and Cons
No market risk
Confidential until/unless signed
Low transaction costs
Large discount
Negotiation with investors could result in burdensome terms
Investors might short stock
Negative market perception
Could bring in serious investor
Registered Direct Offering
Placement to select investors via prospectus
Investors often receive shares and warrants
Could use placement agent/memo
Shares are unrestricted so smaller discount
Issuing more than 20% of outstanding shares could require shareholder approval
Negotiation with investors could result in burdensome terms
Investors might short stock
Negative market perception
Rights Offering Company distributes rights to all shareholders
Right to purchase shares, warrants, etc.
Requires prospectus
Exercise period of 2-4 weeks
Exercise price is at discount to market
Rights may be transferable
Shareholders may have over-allotment option
Offering could be back-stopped by bank or s/h
No shareholder approval required
No negotiation with investors
Favorable in depressed market
Adam M. Klein Partner, International Corporate and Securities Department
03-6089839 [email protected] ** This review was prepared only for informational purposes and as a summary. The information contained herein does not constitute legal opinions or advice.