On the topic of consolidations ...
Changes to financing, share consolidation rules on horizon for Canadian juniors
The TSX Venture's President and CEO, John McCoach, expands on the fate of temporary relief rules for juniors and a new policy that is to come, significantly opening the door to share consolidations.
Author: Kip Keen
Posted: Wednesday , 07 Aug 2013
HALIFAX, NS (MINEWEB) -
There was a brief reference, buried in a recent Reuters article, with profound implications for cash-strapped penny-trading juniors on the TSX Venture. John McCoach, the TSX Venture president, was paraphrased as saying temporary financing rules - ones that let juniors do private placements at lower than usual prices - would likely come to an end August 31.
That was the stated expiry date on the rules anyway, yes, but then such deadlines have been twice extended in the past year since the Venture Exchange made the relief measures as juniors continued to face a tough financing market.
And understandably so from the perspective of the Venture Exchange and the listed companies on it. Somewhere around half the juniors on the Venture are trading below a critical policy threshold: Venture-listed companies with a shareprice under five cents are usually not allowed to do private placements. The temporary rules, among other things, let such financings go ahead nonetheless, providing a lifeline to juniors that would otherwise have to turn to a more time consuming - and perhaps loathed - alternative, share consolidation, to boost shareprices and then finance.
So what was happening here? Had the Reuters article got what to many might seem an esoteric policy measure but that would in actual fact have important repercussions for penniless juniors - early stage explorers especially - in a still frigid financing environment? And if so, why was the Venture planning to do away with temporary rules that made it easier for some juniors to keep the lights on?
The answers, in short, are that, yes, the TSX Venture intends to retire the temporary rules on August 31, meaning no more under five-cent private placements, but that it has other measures in mind to make it easier for juniors to meet the regular financing rules.
“We have decided to allow the temporary relief on certain policies, including pricing of private placements, lapse on August 31,” McCoach said, speaking with Mineweb Tuesday. Instead the TSX Venture is going to ease rules around share consolidation, he said.
As it stands to do a share consolidation on the Venture you need shareholder approval. But, with the new policy the TSX Venture is coming out with this week, McCoach said the Venture would let juniors do consolidations without shareholder approval when the share-ratio therein was 10:1 and less.
Juniors will, of course, still have to comply with securities laws in their home provincial jurisdictions, “but the majority of our companies will benefit from that change,” McCoach said. For example, BC, which a lot of juniors call home, does not require shareholder approvals on such share consolidations, he said.
The idea is to give juniors a way to meet the TSX Venture's regular private placement rules but avoid what otherwise would be a shareholder meeting that takes time and money to arrange.
Critics of the policy change will see it as an erosion of shareholder rights. But McCoach said the TSX Venture researched share consolidations and found the lesser ones are usually approved anyway.
“We've looked back as best we could and it's very, very rare, if ever, that shareholders have voted against a consolidation, particularly a modest consolidation,” McCoach said. “So we don't believe there's really any public interest or minority shareholder risks associated with this change.”
Starting this September, then, it seems reasonable to expect juniors will in increasing numbers consolidate their shares to comply with TSX Venture private placement rules unless, that is, the financing market makes a quick rebound.
http://www.mineweb.com/mineweb/content/en/mineweb-whats-new?oid=200058&sn=Detail
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