Investor Presentaiton
Pre-IPO investment in convertible instruments (cont'd)
The concern with pre-IPO convertible instruments is that while these do not constitute shares,
they may be structured so as to provide investors with a risk-return profile which is similar to,
or better than, that of a shareholder.
In the past, the Exchange has requested removal of conversion price reset mechanisms of
convertible instruments and the termination of all atypical special rights for holders. This is to
ensure the fair and equal treatment of all shareholders under the Rules.
Current Practice in Dealing With Convertible Instruments
a) Conversion price linked to IPO price or market capitalisation
The conversion price for convertible instruments should be a fixed dollar amount or at the
IPO price;
Where instruments will be converted into shares at a price based on a guaranteed
discount to the applicant's IPO price, or the conversion is linked to market capitalisation,
this will create two different prices for the same securities at listing, which is inconsistent
with the Rules;
Discount to the applicant's IPO price or any linkage to the market capitalisation of shares
may also give rise to concerns that the pre-IPO investors do not bear the same investment
risk as public investors.
CHARLTONS
易周律师行
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