TheCorporateCounsel.net

Meredith blogged last week about comments made during the “SEC Speaks” conference by Corp Fin General Counsel Michael Seaman concerning the application of the agency’s rules on shell companies in the context of reverse mergers. As part of that discussion, she linked to a Goodwin memo discussing Staff comments on shelf company issues in this context.  Over on our Q&A Forum (Topic #11254), a member asked about a statement in that memo concerning the inability of affiliates to use the resale shelf S-1 filed after a reverse merger:

Curious about application of Rule 145(c) to affiliates and the following statement in tcc.net April 3 blog: “No Rule 145(c) Securities on the Form S-1 Resale Shelf: investors who were affiliates of the private company and receive securities of the public company in the RM (i.e., Rule 145(c) securities) will be statutory underwriters with respect to resales of those securities and, as such, the Staff has indicated that such securities may not be included in the Form S-1 resale shelf and instead may be sold only in a fixed price offering in which such investors are named as underwriters in the prospectus.” Seems that Staff may be applying this in contexts where they view the resale as a primary offering. Otherwise, I’m at a loss to see where the fixed price offering requirement is provided by Rule 145(c).

This was my response:

Yes, the Staff does view that situation as involving a primary offering. The problem is that because those shareholders are deemed to be underwriters, the offering is viewed as being an “at the market” offering made on behalf of an issuer that isn’t eligible to use Form S-3 for primary offerings. Only Form S-3 issuers are eligible to engage in a primary “at the market” offering. See Rule 415(a)(4) and Securities Act Rules CDI 612.14.

– John Jenkins