PIPE transactions have provided a useful capital-raising alternative when the public markets are inhospitable.  A PIPE transaction also has become the financing of choice when it comes time to raise capital to finance an acquisition, recapitalize a company through a change-of-control transaction, or effect an orderly exit for an existing stockholder with a significant percentage ownership of the company.  We summarize the PIPE activity for 2017 in our infographic.

On February 2, 2018, the SEC approved on an accelerated basis the NYSE’s proposal, as modified by Amendment No. 3, to change its listing qualifications to facilitate listings for certain non-IPO offerings.  Section 102.01B of the NYSE Listed Company Manual (“Section 102.01B”) currently recognizes that some companies that have not previously registered their common equity securities under the Exchange Act, but which have sold common equity securities in a private placement, may wish to list those common equity securities on the NYSE at the time of effectiveness of a resale registration statement filed solely for the resale of the securities held by selling stockholders.  Footnote (E) of Section 102.01B (“Footnote (E)”) currently provides that the NYSE will exercise its discretion to list these companies by determining that a company has met the $100 million aggregate market value of publicly-held shares requirement based on a combination of both (1) an independent third-party valuation of the company and (2) the most recent trading price for the company’s common stock in a trading system for unregistered securities operated by a national securities exchange or a registered broker-dealer (a “Private Placement Market”).

The proposal, as modified by Amendment No. 3 filed on December 8, 2017: (i) eliminates the requirement in Footnote (E) to have a private placement market trading price if there is a valuation from an independent third-party of $250 million in market value of publicly-held shares; (ii) sets forth several factors indicating when the independent third party providing the valuation would not be deemed “independent” under Footnote (E); (iii) amends NYSE Rule 15 to add a reference price for when a security is listed under Footnote (E); (iv) amends NYSE Rule 104 to specify Designated Market Maker (“DMM”) requirements when facilitating the opening of a security listed under Footnote (E) when there has been no sustained history of trading in a private placement trading market for such security; and (v) amends NYSE Rule 123D to specify that the NYSE may declare a regulatory halt prior to opening on a security that is the subject of an initial pricing upon NYSE listing and that has not, immediately prior to such initial pricing, traded on another national securities exchange or in the over-the-counter market.

However, Amendment No. 3 notably revises the proposal, as amended by Amendment No. 2 filed on August 16, 2017, to eliminate proposed changes to Footnote (E) that would have allowed a company to undertake a direct listing (i.e., listing immediately upon effectiveness of an Exchange Act registration statement only, such as Form 10 or Form 20-F, without any concurrent IPO or Securities Act registration).  This means that a direct listing will now require a company to either (1) file a resale registration statement for the resale from time to time of securities held by existing securityholders or (2) undertake a primary offering.  Although this may limit the efficiency of a direct listing, the rationale for the change might be to ensure that there is a basis for Securities Act Section 11 liability to attach to the direct listing.  In contrast, Nasdaq allows a direct listing without a concurrent IPO or Securities Act registration.

As we have previously posted on, the NYSE originally issued its proposal on March 13, 2017, which was later withdrawn on July 19, 2017 and then amended by Amendment No. 1 on July 31, 2017.  The SEC has solicited comments on the proposal, as amended by Amendment No. 3, for submission within 21 days of publication in the Federal Register.

The SEC order is available here.

The proposal, as amended by Amendment No. 3, is available here.

NASDAQ Private Markets and Morrison & Foerster recently discussed trends in private company capital raising.  In this video blog, Anna Pinedo discusses market trends, including the trend toward remaining private longer and deferring IPOs and other exits; the increased reliance on private placements over registered offerings; the investors active in late-stage private placements; and the late-stage private placement market.

To watch this video, visit the NASDAQ Private Markets Resource Center.

Morrison & Foerster Webinar 

Our speakers reviewed and discussed SEC and FASB developments that registrants and directors should consider as they prepare their Forms 10-K, including the following:

  • Use of Non-GAAP financial measures;
  • Comment letter trends;
  • Updating your MD&A;
  • New revenue recognition standard;
  • Developments in derivatives/hedge accounting;
  • New lease accounting rules; and
  • New credit impairment rules.

Speakers:

To view this complimentary webinar, please click here.

In NASDAQ Private Markets’ recent video blog, Anna Pinedo highlights the available private placement exemptions and the factors that companies should consider when contemplating a private placement, including how to choose among the available exemptions.

To watch this video, visit the NASDAQ Private Markets Resource Center.

 

NASDAQ Private Markets and Morrison & Foerster recently described the process for verifying the status of investors when a company chooses to use general solicitation to conduct a Rule 506(c) offering.  In this video blog, Anna Pinedo reviews the SEC Staff’s principles-based guidelines for verification of an accredited investor and also non-exclusive methods for verification.

To watch this video, visit the NASDAQ Private Markets Resource Center.

 

NASDAQ Private Markets and Morrison & Foerster recently discussed the conditions a private company must satisfy in order to rely on Rule 506 for a private placement.  In this video blog, Anna Pinedo highlighted general reminders related to conducting a private placement; general solicitation considerations; approaching accredited and non-accredited investors; bad actor requirements; and Form D filings.

To watch this video, visit the NASDAQ Private Markets Resource Center.

 

NASDAQ Private Markets and Morrison & Foerster recently reviewed Rule 506.  In this video blog, Anna Pinedo focuses on the changes to Rule 506 brought about by the JOBS Act, Rule 506(b) and the conditions for the safe harbor, Rule 506(c) and the additional requirements associated with the use of general solicitation, and market practice.

To watch this video, visit the NASDAQ Private Markets Resource Center.

NASDAQ Private Markets and Morrison & Foerster recently discussed Section 4(a)(2), the statutory private placement exemption, and Rule 506, the most popular Regulation D safe harbor.  In this video blog, Anna Pinedo discusses the requirements for an exemption from registration, the participants in a typical private placement, and the documentation and process.

To watch this video, visit the NASDAQ Private Markets Resource Center.

 

Thursday, November 2, 2017
9:00 a.m. – 7:30 p.m. GMT

The Tower Hotel
St Katharine’s Way
London, United Kingdom E1W 1LD

Morrison & Foerster Sponsorship

An increasing number of European corporate borrowers and investors are now looking to the private placement market as an attractive opportunity, for financing and investment.

The Private Placements Global Forum – Europe 2017 will provide the best opportunity in Europe to hear from the experts on the key issues for European corporates issuing in the private placement market and the key investment opportunities for global investors.

Partner Scott Ashton will deliver the conference chair’s opening remarks and will participate in a panel discussion entitled “Documentation Issues.” Mr. Ashton will also participate in a panel discussion entitled “Private Placements for Academic Institutions.”

Partner Brian Bates will participate in a panel discussion entitled “Issuing in the Global Private Placement Market for European Corporates.”

For more information, or to register, please click here.