From the Regulators

Rights-offering exemption is allowing issuers to raise more capital in a shorter time

By James Langton |

Issuers are making greater use of the rights-offering exemption in the wake of changes designed to make such offerings more cost-effective for firms, according to the Canadian Securities Administrators (CSA).

Since the new rights-offering exemption was adopted in December 2015, "the exemption is being used more frequently and is allowing issuers to raise more capital in a shorter time frame," the CSA states in a notice.

In 2016, almost $250 million was raised from 30 issuers under the exemption, the CSA's notice says. In previous years, an average of 13 issuers raised capital through rights offerings. Of the 30 issuers that used the exemption in 2016, 23 were venture issuers and seven were listed on the Toronto Stock Exchange.

In addition, the time to complete a rights offering dropped to an average of less than 38 days from 85 days, the CSA notes.

The rights-offering exemption was adopted in an effort to address concerns that prospectus-exempt rights offerings were often not used to raise capital because of the time and cost required.

"In general, issuers have been using the exemption appropriately," the notice concludes, adding that regulators have generally been complying with the CSA's requirements.

The CSA says it will continue to monitor use of the exemption and will provide further guidance as necessary.