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Staff Interpretation Letters
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All Years; Shareholder Approval; All
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Identification Number
785
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This is in response to your correspondence regarding whether the company’s proposed issuance of securities (the “Proposed Transaction”) would be aggregated with a prior transaction (the “Prior Transaction”) for purposes of the shareholder approval requirements
of Marketplace Listing Rule 4350(i). Specifically, your question relates to the applicability of Listing Rule 4350(i)(1)(D)(ii) (the “Rule”).
According to the information you provided, in the Prior Transaction, which closed approximately five months ago, the company sold shares of common stock in a private placement to several investors at a price that exceeded the greater of book or market
value. The number of shares that were issued was equal to approximately 15% of the pre-transaction outstanding shares.
In the Proposed Transaction, which is expected to close within approximately one month, the company would issue shares of common stock in a private placement to several investors at a discount to the market value. The number of shares that would be issued
would equal less than 20% of the pre-transaction outstanding shares.
You stated that there are no contingencies between the transactions, the proceeds are for different purposes, and a change in circumstances subsequent to the Prior Transaction gave rise to the need for the Proposed Transaction. Specifically, you indicated
that the funds raised in the Prior Transaction had been used for sales and marketing of a product that did not receive an expected regulatory approval. You stated that the Proposed Transaction is necessary to fund initiatives that the company previously expected
to fund through sales of that product. In addition, you stated that although the placement agent for the Proposed Transaction will attempt to seek investors different from those who participated in the Prior Transaction, the company does not yet know whether
there will be any commonality of investors.
Following our review of the information you provided, and on the assumption that there is no significant overlap between the investors in the Prior Transaction and the investors in the Proposed Transaction, we have determined that the Proposed Transaction
would not be aggregated with the Prior Transaction for purposes of the Rule. As such, given that the issuance in the Proposed Transaction would equal less than 20% of the pre-transaction outstanding shares, the Proposed Transaction would not require shareholder
approval under the Rule.
Please note that if there is significant overlap between the investors in the Prior Transaction and investors in the Proposed Transaction our determination may change. Note also that you have not asked us to, and we have not, reached a conclusion as to
whether any other provision of Listing Rule 4350(i) would require shareholder approval of the Proposed Transaction. For example, if any shares were to be sold at a discount to any officer, director, employee, or consultant of the company, shareholder approval
would be required under 4350(i)(1)(A), and if the issuance could result in a change of control, shareholder approval would be required under Listing Rule 4350(i)(1)(B).
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Publication Date*:
7/31/2012
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Identification Number:
785
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