Some Important Pricing Policy Changes at the TSX Venture Exchange

In the first week of August the TSX Venture Exchange announced some important changes to its policies around pricing of certain securities.  The changes are summarized by the TSXV as follows.

• Minimum Price for Warrants and Options: The minimum allowable exercise price for share purchase warrants and incentive stock options will be reduced from $0.10 to $0.05 per share. This will apply to the full term of the warrant or option.

• Minimum Price for Convertible Debentures: The minimum allowable conversion price for debentures will be reduced from $0.10 to $0.05 per share for the first year of the term of the debenture. It will remain at $0.10 per share for the balance of the term of the debenture.   

• Minimum Price for Initial Public Offerings: The minimum allowable offering price for a non-Capital Pool Company initial public offering will be reduced from $0.15 to $0.10 per security.

These changes will be welcome relief for issuers that regularly trade at sub 10 cent levels, particularly as they relate to the pricing of warrants and options.

Warrants are often issued as a free “sweetener” in connection with the sale of shares in a private placement transaction.  As an investor incentive, 10 cent warrants are obviously not as attractive as warrants priced closer to market value.  Allowing companies to issue options at or around their market price may serve to generate more investor interest, which is always a positive for the companies.

As for option pricing, clearly the perceived value of options as an incentive to employees, directors and consultants is greatly reduced if the exercise price is higher than the trading price of the company’s shares.  Allowing companies to go with an exercise price below 10 cents will increase the perceived value of options as remuneration, possibly allowing issuers to save some much needed cash.

The TSXV says further details will come later this month.  No effective date for these changes has been announced, but the TSXV has indicated that it will consider allowing issuers to rely on the intended changes right away.

For further details about TSXV pricing policies or TSXV matters in general, please contact LW Partner Shane McLean (smclean@lwlaw.com) or one of our other securities law professionals.