The Tokyo Stock Exchange (TSE) has amended part of the
Securities Listing Regulations as of October 31 2014. The
amendment is intended to change the listing requirements for
stock acquisition rights as a rights offering.
A rights offering is a capital increase method using the
gratis allotment of stock acquisition rights to existing
shareholders. A rights offering where an issuer and a
securities company enter into an agreement by which the
securities company commits to acquire and exercise the stock
acquisition rights that are not exercised within a certain
period is called a commitment-type rights offering, while a
rights offering under which there is no such agreement is
called a non-commitment-type rights offering.
In Japan, rights offerings used to be extremely rare.
However, their use has accelerated in recent years, although
most have been the non-commitment type.
Rights offerings are generally considered to be a capital
increase method more beneficial to existing shareholders than
the conventional methods (public placement and private
placement). However, it had drawn attention to the fact that by
using the non-commitment type rights offering, companies unable
to secure funding via the conventional capital increase method
were able to issue a large number of new shares without a third
party evaluation of the rationality of the capital increase.
This was seen as harmful to shareholders, and the amendment
addresses that issue.
Under the new listing requirements, in order to list stock
acquisition rights as non-commitment type rights offerings, two
criteria must be met. The first requires: (i) examination of
the reasonableness of the capital increase by a securities
company that is a trading participant in TSE; or (ii)
procedures confirming the intention of shareholders, such as a
general meeting of shareholders. The second requires that,
regarding the business results and financial conditions of the
issuer: (i) there is at least one business year recording
positive ordinary income, during the most recent two years; and
(ii) there are no liabilities in excess of assets as of the end
of both the most recent business year and quarterly accounting
In addition, the listing date of stock acquisition rights
should be the day after the first day of the exercise period of
the rights, which is intended to ensure a fair price
Cao Minh Thi