When an exchange loses nearly 60% of its value in a two year period, corporate carnage is unavoidable and accommodative policy is needed to help get companies through the grind.
The TSX Venture Exchange (owned by the TMX Group) has recognized the difficult environment many of its listed companies are facing (particularly given the lack of available capital for resource companies), and has implemented policy changes which may ease the burden.
The Exchange rescinded its bulletins/notices from 2007 and 2008 related to how deals may be structured and Founder Shares Guidelines. Basically, rescinding the capital structure guidelines will remove the 15% limit for Founder Shares. This means that individuals who start a new public company on the TSXV will be allowed to own more of the outstanding shares than previously permitted.
Given that insiders must report stock sales/purchases they make in their company, transparency remains strong on the Venture.
TSX Venture Companies Private Placements
Securities Law Firm Clark Wilson LLP reported:
“Private Placement Pricing Changes
Effective August 31, 2013, the temporary relief measures implemented by the Exchange to permit private placements to be conducted at below prior price thresholds will lapse. New pricing requirements of the Exchange for private placements will come into effect and include:
1. Minimum Price for Warrants and Options: The minimum allowable exercise price for share purchase warrants and incentive stock options will be reduced from $0.10 to $0.05 per share. This will apply to the full term of the warrant or option.
2. Minimum Price for Convertible Debentures: The minimum allowable conversion price for debentures will be reduced from $0.10 to $0.05 per share for the first year of the term of the debenture. It will remain at $0.10 per share for the balance of the term of the debenture.
3. Minimum Price for Initial Public Offerings: The minimum allowable offering price for a non-Capital Pool Company initial public offering will be reduced from $0.15 to $0.10 per security.
4. Shareholder Approval for Share Consolidations: The Exchange will only require shareholder approval for a share consolidation which, when combined with any other share consolidation conducted by the issuer within the previous 24 months that was not approved by the issuer’s shareholders, would result in a cumulative consolidation of greater than 10 to 1 over such 24 month period. It should be noted that an issuer may still be subject to shareholder approval requirements under applicable corporate laws.”
Point 4 is particularly interesting. Many companies on the TSX Venture Exchange may be pondering a rollback of sorts given the harsh environment for some juniors who are out of cash and lack an attractive asset. Given that shareholders are owners in the company, for some of them to potentially not have a say in a rollback may raise some questions.
With the deadline for TSX Venture companies to be able to raise money under $0.05 approaching (August 31, 2013), expect a busier news period for financing announcements over the coming few days. Stockwatch reported that an estimated 40% of TSX Venture stocks trade under $0.05. If they can’t raise the necessary capital before the deadline, rollbacks are likely soon to follow.
Click here to read full press release from the TSX Venture Exchange released on August 7, 2013.
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