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1. What is a free-writing
prospectus? What is
the conceptual basis for allowing a free writing prospectus that
complies with the conditions of Rule 433? See
Rule 433(a). But note it is
still a Section 2(a)(10) prospectus and "
will "be deemed to be public, without regard to its method of use or
distribution, because it is related to the public offering of securities
that are the subject of a filed registration statement",
which has implications for liability purposes that we will discuss
(hopefully) to some extent down the road. 2. Could a document on the issuer's website describing the offering and recommending that readers contact their brokers and put in an order to buy be a free writing prospectus? Is it awritten communication? Is it a graphic communication. 3. Assume that AnimateEase within the past year was subject to an injunction obtained by the SEC for violating Section 5 in the sale of unregistered securities as part of its raising of "seed capital." Is it an ineligible issuer? 4. Assume that the same proceeding involving violations of Section 17(a) of the Securities Act and it was also enjoined from further violations of Section 17? How does that impact your answer as to whether it is an ineligible issuer? 5. Assuming that AnimateEase is an ineligible issuer, to what extent is it precluded from using a free-writing prospectus? See Rule 433(a) and Rule 164(e)(1) 5. Assume that this is a follow-on offering. AnimateEase a year ago made a registered offering of a 1 million shares at $4.00 a share to 350 investors and the shares were not listed on a stock exchange or Nasdaq. Is it an ineligible issuer with respect to the current offering. To what extent is it precluded from using a free writing prospectus? See Rule 164(e)(2). 6. Assume the facts in 5 above, After the completion of the offering is AnimateEase a reporting company? If it is, under what Section of the Exchange Act, Section 13 or 15(d) is it a reporting company. 7. Assume that AnimateEase initial offering goes largely as expected and that it sells 7 million shares at $10 in its initial offering, lists on Nasdaq as a National Market Security and registers under the Exchange Act its common stock. Under what Section of the Exchange Act does it file '34 Act reports. 8. At the conclusion of the public offering there are 12 million shares outstanding, 7 million held by the public that purchased in the public offering and 5 million held by insiders that are deemed affiliates. One year later the stock is trading at $10 a share and the stock is still held in the same fashion--7 million by the public and 5 million by insiders .(a) What is its public float. (b) Assume that in the course of that year, the insiders relying on an appropriate exemption (Rule 144) sold 1 million shares and now the public holds 8 million shares and insiders 4 million. What is the public float? |
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| 9. Assume the facts in 8(b) above,
conceptually what type of registered offerings on
Form S-3 could it make under
General Instruction I.B. Transaction Requirements assuming it is in
compliance with the requirements of General Instruction I.A? Same
questions based on assumptions under 8(a), Same question assuming it
fails to comply with one of the conditions of General Instruction I.A?
10. Assume AnimateEase is making an initial public offering and is an eligible issuer and proposes to distribute after it files a registration statement by email, fax, and on its website to an extensive select list including but not limited to suppliers and customers the following communication on the company's letterhead:: We are pleased to inform you that we have filed a registration statement with the SEC and that it is being underwritten by Silicon Securities. With the recent completion of a number of marketing arrangements and the improvements being made in the several versions of the AnimateEase we are optimistic that the company will continue to grow. AnimateEase was named last year by PC magazine as the outstanding animation software for high school level students. Our professional version has recently attracted many new purchasers. We suggest that you contact your dealer and indicate your interest at the earliest date possible. |
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| a. Does the company have to include a
preliminary prospectus? If at this point the prospectus filed with the
Commission does not include the estimated offering price range can it
distribute the the free writing prospectus with or without the
preliminary prospectus. Explain your answer. b. Assuming that the preliminary prospectus filed as part of the registration statement includes the estimated offering price range. Does the communication have to include a legend? Describe the general content of the legend if required. Could the communication also include an email address and/or an URL to the companies website to obtain the required documents.. c. If included on the company's website, how is the company going to deliver the preliminary prospectus? See Note to Rule 433(b)(2)(1) d. Assume that the preliminary prospectus makes no reference to AnimateEase being named by PC Magazine as the outstanding animation software for high school students, can this information be included in the free writing prospectus? e.Assume that the preliminary prospectus states that sales of the professional version have been flat, can this proposed communication state the professional version has recently attracted many new purchasers. f. Does the proposed communication have to be filed? By whom? When? 11. AnimateEase in the course of the preparation of the registration statement in the course of the underwriter performing its due diligence made all of its relevant files, contracts, internal forecasts, sales, and related information available to Silicon Securities. Silicon Securities after the registration statement is filed prepares the following to be released by email only to its established accounts: We are pleased to inform you that AnimateEase filed a registration statement with the SEC and that are acting as the underwriters. Based on our review of information available to us, we have concluded that AnimateEase has taken long strides toward becoming a leading distributor of animation software for amateur and professional animators.. We are optimistic that the company will continue to grow. AnimateEase was named last year by PC magazine as the outstanding animation software for high school level students. We suggest that you contact your dealer and indicate your interest at the earliest date possible. a. Does the issuer have to file the communication as a free writing communication? Explain. Does the underwriter have to file the communication as a free writing communication? Explain. Same answer if the underwriter posts the communication on its website with unrestricted access? Explain. b. Does the communication have to include a legend? If the underwriter distributes it as proposed, does it have to be accompanied by a preliminary prospectus? With or without the offering price range on the cover page? 12. Review your answers to Question 8(a) and 8(b). Assume the AnimateEase is making a registered public offering of common stock 13 months after it completed its initial public offering and that it satisfies the General Instruction I.A registrant requirements of Form S-3 and has a public float o $100 million. It is proposing to offer 10 million shares at $15. a share, but leaves the offering price blank and no offering price range on the cover page of the prospectus included as part of the registration statement filed with the Commission. If it uses a free writing prospectus, can it distribute it without delivering a preliminary prospectus? What conditions must it otherwise comply with? What registration form will the shares be registered on? 13. Same question as 12, except its public float is $70 million. If it uses a free writing prospectus, can it distribute it without delivering a preliminary prospectus? What conditions must it otherwise comply with? What registration form will the shares be registered on? 14. Same question as 13, except it is proposing to offer only non-convertible preferred stock. a. Assume first it has been rated investment grade by an appropriate rating agency; assume second it has not. If it uses a free writing prospectus, can it distribute it without delivering a preliminary prospectus? What conditions must it otherwise comply with? What registration form will the shares be registered on? In addition to the applicable provisions of Rule 433 take into account Form S-3 General Instruction I.B.2. .15. Same question as 13, except it is proposing to register for sale securities owned by the three principal officers of the company in accordance with Form S-3 General Instruction I.B.3. If it uses a free writing prospectus, can it distribute it without delivering a preliminary prospectus? What conditions must it otherwise comply with? What registration form will the shares be registered on? 16. What criteria does a company have to meet to be a well-know seasoned issuer (WKSI)? Under the amendments to Form S-3, can a WKSI use Form S-3.
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