RE:UP to 25% of Units Potentially Sold to InsidersAccountprince wrote: This morning's disclosure is certainly an eye opener. So undefined insiders could participate in up to 25% of the offering. Something should have been filed 21 days prior to their participation in the closing (July 6 for that filing?). I haven't seen anything yet.
The disclosure also lists some exemptions they are relying upon to exempt them from rules governing treatment of non-insider shareholders. Anyone familiar with these rules?
So we were at $0.53 per share. A bought deal for units is done at $.425 per share and the share price is engineered to less than $0.40 per share and stays there until closing. Insider provision to acquire 25% of the issue disclosed in press release concurrent with the closing announcement.
So if insider participation should have been disclosed say July 6 does the FMV get established that day or do you wait until they "negotiate" the bought deal with the underwriters on July 20 when the price is dropped? Many questions and no answers.
Looks like insiders will do anything to acquire more shares. That - in a very perverse way - validates the value we all feel is there.
I am not that familiar with the rules AP but I read the following paragraph...
"exemptions from the formal valuation and minority shareholder approval requirements provided under sections 5.5(a) and 5.7(a) of Multilateral Instrument 61-101 on the basis that participation in the Offering by insiders does not exceed 25% of the fair market value of the Company's market capitalization..." ...as meaning, that as long as insiders don't give themelves more than 25% of the MC they can push it through without minority shareholder approval, or the requirement of a more formal valuation. A nice loophole for Cdn equities?
Perhaps the 25% requirement influences Toray or Birch Hill (definitionally insiders?) as to participation ?.
The required notice period is also an interresting question that I do not have the answer to.
Nevertheless, overall, your point about "validation" is well made. My issue is not so much regarding validation as it is about making sure there is
fairness.
For several companies that I have owned...it almost seems as if sometimes there is an irresistable temptation by some insiders of Public companies I have owned, to use financings as an opportunity to gain an advantage over minofrity shareholders (MSr's). They can do so in a varitey of ways including: (1) financing at too low a value (say in relation to potential, true value, recent highs, and Analyst targets), (2) granting unequal access to the finnancing to all shareholders, and (3) via the inclusion of various sweeteners suchs as options and warrants - that require no immediate cash outlay. With an unequal ability to particpate - it can have the net effect of transferring a not insignificant share of (always finite) future earnings & cash flows to savvy/privileged/fully in-the-know participants, often at the expense of some MS'rs that may have in fact "brung them". Some MSr's are painfully aware that the pie is finite, and shares/slices can effectively be redistributed over time. There is no better opportunity to redistribute future earnings,than via financings and the annual option dole period. I often hear the excuse that MS'rs can participate by buying on the market , sometimes at or below the financing price. Sure but that requires a not always available cash (vs say warrants), it needs to account for the true value of the sweeteners which may be off limits to MS'rs, and a certain amount of blind faith (not acting with all the facts). Buying more shares adds risk and expends capital. Accepting options/warrants does not.
I like it when I am in charge of slicing up the pie at dessert time. Sometimes my hand slips and I accidentally end up with a bigger slice than some of my valued guests. My friends think I am sometimes
crusty if I am handed a "too small" slice by someone else.
When dealing with two kids of course, the solution is to let one slice and the other one choose their peice (to keep the peace)...as a matter of fairness.
MM