IPO: Easier regulation of warrant conversion cards of IPO-bound companies

Mumbai: Companies planning an initial public offering (IPO) may take a long time in converting their pending assets guaranteed and special class shares. The regulator plans to relax the pre-IPO requirement for the conversion of all outstanding shares in companies that choose to file paperwork under the proposed confidential filing framework. direct knowledge of the matter said.

In September, the stock and the Exchange Board of India (Sebi) have announced that they will introduce a special confidential filing framework through which companies will be able to file offer documents privately with the regulator. market regulator and consult with this agency. They don’t need to file any public offering documents until the actual launch IPO. Sebi will soon publish the final guidelines on this framework.

Sebi’s current rules say that a company is not eligible to file IPO documents if there are any outstanding convertible securities. For companies that choose to file confidentially, this rule can be relaxed and convertible securities need to be converted into common equity shares by the time Sebi issues its final observations. themselves, the people quoted above said.

An email sent to Sebi seeking comment remains unanswered.


“Companies will have another 5-6 months to convert pending warrants, and in terms of markets, a lot can change in this time period,” said one person quoted above. . “This will allow companies to convert warrants only if they are serious about going for an IPO.”

Estimates show that around 150 companies have filed for offerings in the past four years, and around 60 have postponed or canceled their planned IPOs due to various factors, including market volatility.

Management experts say these changes could significantly benefit the start-up and newcomer ecosystem as warrant issuance is a common practice in the sector. Private equity funds have sales contracts with companies and shares are purchased in installments. So, initially, the fund is a warrant allocated to the total number of shares that the investor wants to buy in the company and the investor pays only a part of the total value paid during the warrant issue. Within the period specified in the contract, the fund converts all warrants into shares.

“There is concern that after a company converts all pending warrants, they have to wait several months for approval. During that time, market conditions may change or any event occurs. Unforeseen things can happen,” said another person quoted above.

“The adjustments will give issuers flexibility to freeze their capital structure at any time between filing confidential IPO documents and receiving Sebi observations.”

Companies that submit confidential offering documents will be prohibited from advertising or marketing the sale of shares among retail investors until they submit the public offering document.


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