Pursuant to a bulletin issued on April 8, 2020, the TSX Venture Exchange (“TSXV”) implemented further temporary relief measures (the “Temporary Relief“) in response to the COVID-19 pandemic, regarding its $0.05 minimum pricing requirement.
The TSXV has certain policies for the minimum pricing of securities that are listed on the TSXV (“Listed Shares“) in connection with the issuance of such Listed Shares by issuers in various circumstances. For example, the TSXV has a minimum pricing requirement for shares offered in a private placement. This minimum pricing requirement usually provides for an allowable discount to the Market Price of the Listed Shares, subject to an absolute minimum of $0.05 per share. Pursuant to the Temporary Relief, if the Market Price of the Listed Shares is $0.05 or lower, the minimum price is such Market Price, subject to an absolute minimum of $0.01. If the Market Price is above $0.05, the minimum price remains subject to the existing rules. The term “Market Price” means, subject to certain limited exceptions, the last closing price of the Listed Shares before the issuance of the news release required to fix the price at which the securities are to be issued or deemed to be issued.
The Temporary Relief does not affect the minimum pricing of the exercise price of stock options and warrants, which remains at $0.05 per Listed Share. It also does not affect the minimum conversion price of convertible securities other than options and warrants, which remains at $0.05 per Listed Share during the first year of the conversion term and $0.10 thereafter. The Temporary Relief is in effect until September 30, 2020.
The applicability of the Temporary Relief in various circumstances is discussed in further detail below.
Under the TSXV policy for private placements, the offering price of Listed Shares must not be less than the “Discounted Market Price“, which follows a tiered approach for the allowable discount percentage to the Market Price of Listed Shares. The absolute minimum offering price is $0.05 per share. Under the Temporary Relief, where the Market Price of an issuer’s Listed Shares is not greater than $0.05, the Discounted Market Price is equal to the Market Price, subject to a minimum of $0.01 per share.
Under the TSXV policy for prospectus offerings, the offering price will generally be the Market Price at the date of the receipt for the final prospectus, with a maximum 20% discount to such price and subject to a minimum of $0.05. Under the Temporary Relief, where the Market Price of the issuer’s Listed Shares is not greater than $0.05, the minimum offering price is equal to such Market Price, subject to a minimum of $0.01 per share.
Under the TSXV policy for short form offerings, the price of offered securities cannot be less than the greater of: (a) the closing price of the Listed Shares on the trading day before the news release disclosing the offering is disseminated, less a discount of 10%; and (b) $0.05 per share or unit. Under the Temporary Relief, where the Market Price of the issuer’s Listed Shares is not greater than $0.05, the minimum offering price is equal to such Market Price, subject to a minimum of $0.01 per share.
Shares for Debt
Under the TSXV policy relating to the issuance of shares for debt, the deemed price at which debt may be converted into Listed Shares must not be less than the applicable Discounted Market Price, as discussed above under “Applicability ¾ Private Placements”. Under the Temporary Relief, where the Market Price of the Listed Shares is not greater than $0.05, the minimum deemed price at which debt may be converted into Listed Shares is $0.01 instead of $0.05.
Bonus Shares and Warrants
Under TSXV policy relating to bonus shares and warrants, the calculation of the number of Listed Shares and warrants that may be issued as a bonus for a loan or guarantee is calculated using the Market Price, which includes a minimum price of $0.05. Under the Temporary Relief, the minimum price is revised from $0.05 to $0.01 where the Market Price of the Listed Shares is not greater than $0.05.
Under NEX Policy, all share issuances by issuers are subject to the same price protection mechanisms and pricing policies as would apply for such transactions on the TSXV. Therefore, the same Temporary Relief reduction of the minimum price to $0.01 applies, as discussed above.
In order for an issuer to qualify for the Temporary Relief, the following criteria must be satisfied:
- The proposed offering price must be reserved by way of news release, not by Form 4A – Price Reservation Form.
- The aggregate number of Listed Shares of an issuer that are issued under the Temporary Relief at a price below $0.05 cannot be more than 100% of the number of the issuer’s outstanding Listed Shares on a non-diluted basis, as of April 7, 2020.
- The proceeds of any financing cannot be primarily used to pay management fees or for Investor Relations Activities (as defined in TSXV policies).
- The issuer must fully disclose to the public at the time of the announcement of any financing, and at the time of closing of any financing, the proposed use of proceeds of the financing, including any payments to related parties.
- In addition to any applicable resale restrictions, all securities issued under the Temporary Relief at a price below $0.05 are subject to a four month hold period under TSXV policies.
In addition, in order to ensure the broadest possible distribution, the TSXV has encouraged all issuers in respect of any private placement financing to rely on the “existing security holder prospectus exemption” if available.