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Warrants are typically used as “sweeteners” for investors in a deal. They have two distinct advantages for the issuer: The potential investor is not necessarily entitled to insider information prior to an acquisition or other capital event. Does not adversely impact a company’s S-corp status.
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A company typically issues warrants* to investors & institutions participating in a new share or bond issue. The warrant is a "kicker" to sweeten the deal by granting participants the right, but not the obligation, to acquire stock in the company at a set price, by a given date.
Warrants give the holder the right to buy shares in the issuing company at a set price and at a future date. They’re not issued by individuals or the market itself.
(1) A company limited by shares may, if so authorised by its articles, issue with respect to any fully paid shares a warrant (a “share warrant”) stating that the bearer of the warrant is...
- Introduction
- Recent Developments
- The IPO Process: Steps, Timing and Parties and Market Practice
- Main Market
- Aim
- Final Steps: Pricing, Prospectus Approval and Admission
- Regulatory Architecture: Overview of The Regulators and Key Regulations
- Public Company Responsibilities
- Potential Risks, Liabilities and Pitfalls
The decision for a private company to ‘go public’ may be based on several factors. An initial public offering (“IPO”) (including, in the case of the London Stock Exchange’s (the “LSE”) AIM, an admission to trading by way of placing) is likely to provide a private company with enhanced access to capital and liquidity and increase its public profile....
Brexit
By far the most important recent regulatory development affecting IPOs in the UK has been the decision of the UK to leave the European Union (the “EU”), a decision that finally took effect at the end of the Brexit transitional or implementation period on 31 December 2020. Many essentially technical and consequential changes to UK law (as it implemented and included EU law), including in relation to the prospectus, listing, transparency and market abuse regimes, took effect from the end of 202...
The UK prospectus regime following Brexit
The UK prospectus regime is primarily laid down in the on-shored version of the EU Prospectus Regulation ((EU) 2017/1129) (the “UK Prospectus Regulation” or “Prospectus Regulation”) and related Commission Delegated Regulations (in particular, Commission Delegated Regulation 2019/980 (prospectus format, content, scrutiny and approval) (the “UK Delegated Prospectus Regulation”)), Part VI of the Financial Services and Markets Act 2000 (“FSMA”) and in the Prospectus Regulation Rules section (the...
A new UK prospectus regime expected in 2025
In March 2021, the Listing Review (see Recent Listing Rules changes and reform below) called for a fundamental review of the prospectus regime with the aim of making a prospectus a much more useful and less onerous document for investors to read and issuers to prepare, taking account of the type of issuance for which it is being used. The Government subsequently consulted on the principles of a new UK prospectus regime and in March 2022, HM Treasury published its conclusions[iv]on the shape t...
Markets
A first step for a company considering listing in London will be to determine which market is right for it. By far the most commonly used markets are those of the LSE, although a few other UK regulated or MTF markets exist, such as those operated by Aquis Stock Exchange (“AQSE”) or Cboe. Given the prevalence of the LSE, however, the procedures and regulations described below assume a listing on one of the LSE’s markets. The LSE operates two principal markets: the Main Market; and AIM, which a...
Listing segments
A company seeking admission to the Official List, rather than trading on AIM, will need to decide early in the process whether to seek admission to the ‘premium’ listing segment of the Official List or to the ‘standard’ listing segment. Both premium and standard segments are available to UK and non-UK incorporated companies wanting to list their equity, although, for equity shares of commercial companies, those segments are planned to be replaced by the new single ESCC segment (or, for qualif...
A new listing regime in H2, 2024
As already mentioned, the FCA is planning to introduce a new listing regime with a single listing segment for commercial companies’ equity in H2, 2024. The existing and new regimes are summarised in the tables below.
The ADSs require that an issuer contacts the LSE no later than 10 business days before the application for admission is to be considered, using a prescribed form titled ‘Form 1’ and accompanied by a draft copy of the prospectus. The application will, however, be considered provisional at this stage and will only be deemed a formal application once ...
Rules 2 to 6 of the AIM Rules require that the company provides the LSE with certain information at least 10 business days before the expected date of admission. This covers similar information to that required by Form 1 for a Main Market IPO but also includes additional information such as a brief description of the business, the names and functio...
The IPO will be launched when the bookbuild is completed, the share offer is priced and allocated, the underwriting agreement is signed, a final composite prospectus is approved (in the case of a Main Market IPO), and listing is granted by the FCA and the shares are admitted to trading by the LSE.
Admission to trading
The LSE regulates the admission of securities to trading on the Main Market, and in doing so it is responsible for publishing the ADSs. These set out the LSE’s rules and requirements in relation to a company’s admission to trading and ongoing disclosure obligations on the LSE’s regulated markets. In the case of an AIM IPO, the Listing Rules and the ADSs will not be applicable. Instead, applicants will be required to comply with the AIM Rules published by the LSE and their Nomads with the LSE’...
Prospectus disclosure
The disclosure obligations for a company seeking to list in London are set out in the PRRs, in the case of a company seeking admission to the Main Market, in which case the key disclosure document is a prospectus, or the AIM Rules, in the case of a company seeking admission to AIM (assuming, as mentioned above, there is no ‘offer to the public’), in which case the key disclosure document is an ‘admission document’. The UK Prospectus Regulation requires a prospectus to be written in an easily...
Mineral and other specialist companies
Additional disclosure obligations apply to mineral companies[xix] and scientific research-based companies,[xx] and also property companies and shipping companies, as ‘specialist issuers’, previously under ESMA’s update of the Committee of European Securities Regulators’ ‘prospectus recommendations’ and, since May 2022, in accordance with the FCA’s Primary Market Technical Note 619.1.[xxi] This contains guidelines on disclosure requirements under the Prospectus Regulation, including for such s...
Ongoing listing obligations
Following its IPO, a company will be faced with significant new continuing obligations as a publicly listed company.
UK MAR obligations
Another significant change for a newly listed (or an AIM-traded) company will be its increased disclosure obligations and responsibilities with respect to ‘inside’ or price-sensitive information under UK MAR (i.e., the UK on-shored version of the EU Market Abuse Regulation ((EU) 596/2014)). Among other things, UK MAR: 1. prohibits dealings in securities while in possession of inside information concerning those securities; 2. requires disclosure ‘as soon as possible’ by an issuer of inside in...
Other ongoing obligations for UK incorporated issuers
Issuers that are, or in connection with their IPO reincorporate as, UK companies will have additional corporate reporting obligations under UK company law, such as the requirement to include a standalone strategic report in their annual report that sets out a fair review of the company’s business and a description of the principal risks and uncertainties facing the company, illustrated with the use of KPI analysis if necessary. They must also produce an annual directors’ remuneration report,...
The decision to conduct an IPO is a significant step for any company and requires careful planning and diligent execution to minimise the potential risks and liabilities that could arise from the IPO process and subsequently from the company’s new status as a listed company. Firstly, the company and all its directors, including those being appointe...
Oct 30, 2023 · An equity warrant is a financial instrument under which a company grants a contractual right (but not an obligation) to a third party (the warrantholder) to subscribe for a specified class of shares in that company (ie equity securities). Under a debt warrant, the subscription right is over debt, rather than equity, securities.
People also ask
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An overview of warrants, how they work, and the parties and documents involved in an issue of warrants.
