On May 10, 2018, the Toronto Stock Exchange (TSX) issued Staff Notice 2018-003, Prospectus Offerings and Private Placements (the Staff Notice), which provides guidance regarding pricing a prospectus offering or private placement where there has been recent disclosure of material information.

Generally, the TSX requires private placements and prospectus offerings to be priced at “market price” less an allowable discount. The TSX defines “market price” as the five-day volume-weighted average trading price (Five Day VWAP) of the securities on the TSX immediately preceding the relevant date. In the Staff Notice, the TSX notes there may be instances where the Five Day VWAP may not be appropriate, especially in cases where trading days occur both before and after material information is disclosed.

Consequently, the TSX may elect to let issuers use a shorter time period for determining market price, taking into account:

  • the liquidity and volatility of the issuer’s securities, both before and after the material information is announced;
  • the time period proposed to be used as a reference for market price;
  • the rationale for pricing a financing immediately after the material information is disseminated; and,
  • any insider participation in the financing.

As the availability of this particular exception is expected to be limited, the TSX strongly encourages listed issuers and their advisors to contact them when considering a shorter time period for calculating market price. The TSX will continue to permit exceptions in cases where an undisclosed event would not occur without a financing agreement, such as where financing proceeds are used to fund an acquisition and the key terms of the financing, including the price, are announced at the same time as the acquisition.

TSX Staff Notice 2018-003, Prospectus Offerings and Private Placements can be found here.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

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