RO-PP-PO
What is a warrant?
A warrant is a certificate to buy ordinary shares. The warrant holder is entitled to buy the
stated underlying securities at the exercise price and in the quantity stated during the
period specified by the issuer.
Benefits of issuing warrants
For the
Company
— The terms and exercise period of the warrants can be specified to obtain the
amount needed when the company needs it most. This way the company can
optimize benefits from the capital and can slow the dilution effect’s impact,
while maintaining their debt to equity ratio at their desired level.
— The
company has more opportunities to expand its investor base, as those
investing in warrants can be different from those buying the company’s ordinary
shares. Warrants which are popular among investors can probably make the
company's ordinary shares more interesting.
— As warrant holders exercise their rights, the company’s number of ordinary
shares will increase and consequently boost stock liquidity in the market.
— Issuing warrants along with other financial instruments will increase
attractiveness and reduce the funding cost of the financial instruments offered.
Benefits of issuing warrants (continued)
For
Shareholders
— Shareholders will benefit from issuing warrants if the exercise price is less than the
market price. Thus, shareholders will be able to buy ordinary shares for less than
the market price, or “in-the-money”.
— The rights offering warrant will reduce the dilution effect’s impact, as shareholders
are able to choose whether they would like to exercise their warrants or not.
— Warrants also add investment choice. Investors who wish to invest in a company
can instead invest in warrants. The investment cost of warrants is generally lower
than a direct investment in ordinary shares. Additionally, the market price of
warrants is usually more volatile than the company's stock movement.
— Warrants provide liquidity to the company's ordinary shares traded in the stock
market, which indirectly benefits owners trading their own stock.
Issues for consideration
— Capital increase shares should be issued along with free warrants to current shareholders, as
a sweetener, which will make them attractive and enable the company to get the required
funds. In addition, the company will gain more funds from exercising warrants by propose
capital increases agenda to support new warrants.
— The amount of funds needed by the issuers; the warrant term and exercise period should be
timed to be ready when the funds are needed.
— The number of warrants, shares issued reserved for the warrant exercise, shares reserved for
the exercise of existing warrants and convertible debentures (excluding the ESOP-Warrant)
shall not exceed 50% of the company’s paid-up capital.
— Setting the exercise price and ratio : If the exercise price of warrants is too high, shareholders
will not find it profitable to exercise their warrants; they will be "out-of-the-money".
— Impact
on shareholders (dilution effect), market price (price dilution) and voting rights
(control dilution) in case of warrant PO/PP issuance.
— Complying with right adjustment conditions of existing warrants.
Procedure to issue and offer warrants
Right
Offering (RO)
Private
Placement (PP)
Public
Offering (PO)
7 days
7 days
7-14 days*
10 years
10 years
10 years
Board of directors resolves to issue warrants
and increase capital by issuing shares to
support the exercising of warrants.
Submit Capital Increase Report Form
(F53-4) along with the board’s resolution
to SET on the same day the resolution
was passed or by 09:00 am. the next
business day.
Invite shareholders to meet to seek
approval:
— Minimum period the invitation letter
should be sent before the meeting
— Details of and information on warrants
to be specified
— Maximum term for warrants
Arrange shareholders’ meeting to seek
approval:
— To pass, a resolution must be approved
from ≥ 3/4 of total votes from shareholders
attending the meeting and having voting
rights.
— To pass, those voting against the offering
must not be ≥ 10% of shareholders with
voting rights
In case of low
offering price
Submit registered capital change at
Ministry of Commerce within 14 days
after shareholder resolution passed.
— Submit an application and filing to
the SEC
— appoint a financial advisor.
Offer warrants within scheduled period of:
Submit report to the SEC on the results
(including checklist) of warrant offering
after closing date.
1 year
1 year
6 months**
15 days
+ Checklist
15 days
+ Checklist
45 days
Report exercise results within 15 days of
the last day of exercise month or of each
exercise period.
* In case when the application wishing to make an offer for sale of warrants to specify investors (placement) at discount
lower than 90% of the market price, the notice of the shareholders' meeting must be sent to shareholders at least 14 days in advance.
** May be extended, but must not exceed 12 months
“Our business needs a large amount of capital for expansion, so we seek
funding from various sources, such as project finance and operating cash
flow. For these reasons, we need to increase capital to maintain our
desired debt to equity ratio. Warrants are a popular financial tool we use to help relieve dilution
effect, and we have already issued them six times.
Factors to consider when issuing warrants include the amount of funds needed over the
next three to five years, control dilution, price dilution and the business outlook. These factors
are used to design the type, amount, terms, and exercise period of warrants, in accordance
with the company’s needs. The most important challenge is that the growth of company's
performance should come from those capital increase which will eventually reflect company's
real value
Lalitphant Phiriyaphant
Chief Financial Officer and Company Secretary
Ticon Industrial Connection PCL
“Issuing warrants in 2012 was appropriate and interest-free for the company’s
situation that for our expansion. The ESOP-warrants were offered to our employees
as compensation for their long-term contributions that resulted in the company’s
achievements today.”
Sermkhun Kunawong
Chief Executive Officer
CMO PCL
Laws / related notifications
Public Limited Companies Act, BE 2535 (1992)
The Notification of the Securities and Exchange Commission No. TorChor. 34/2551
Re: Application for and Approval of Offer for Sale of Newly Issued Share Warrants
and Newly Issued Underlying Shares
The Stock Exchange of Thailand, Bor.Jor./Ror.03-00 Re: Listing of Warrants on
Ordinary Shares or Preferred Shares or Debentures 2544
62 The Stock Exchange of Thailand Building Ratchadapisek road, Klongtoey, Bangkok 10110
(2001)
2014, January