La. Admin. Code tit. 10 § XIII-513

Current through Register Vol. 50, No. 11, November 20, 2024

Section XIII-513 - Offering Price

A. Securities shall be offered and sold at a price which is fair to the issuer or selling stockholders and to the purchasers. In determining whether a price is fair, the commissioner will give predominant weight to the standards set forth below as shown to the satisfaction of the commissioner.

1. If there is an active and informed public market in the class of securities to be offered and sold, the offering price shall bear a reasonable relationship to the recent public market price. An active public market may be evidenced by:

a. daily or weekly quotation of the class of securities in the Wall Street Journal for the period of at least six months preceding the offering; or

b. at least 300,000 shares outstanding to public shareholders; 20,000 or more shares traded by public shareholders during each of six or more preceding months; the absence of transactions by insiders during the preceding six months having a material effect upon the market price; the number of public stockholders at the beginning and end of each of said months of not less than 1,000; and at least two dealers regularly making a market in such class of securities; or

c. such other facts or circumstances which tend to show, to the satisfaction of the commissioner, that the class of securities is traded sufficiently by public stockholders unrelated to the issuer so that the prevailing market price at any given time during the six preceding months accurately reflected the fair value of the security and was a price independent of any influence other than the normal buying and selling of public stockholders. An informed public market may be evidenced by:

i. reports to the public shareholders which were provided by the issuer during the preceding year at least quarterly; or

ii. such other facts or circumstances which tend to show, to the satisfaction of the commissioner, that there is a free flow of information from the issuer about the business of the issuer to the investment community of the public. The commissioner may require an applicant for registration to submit sufficient evidence to show the existence of an active and informed pubic market.

2. If there is not an active and informed public market in the class of securities to be offered and sold, the offering price shall conform to at least one of the standards set forth below, except that the commissioner, in his discretion, may require conformity to more than one of the standards set forth below.

a. In connection with a pubic offering of securities for cash pursuant to a registration statement under the Securities Act of 1933, which offering is the subject of a firm underwriting commitment by an underwriter or syndicate of underwriters, all of whom are registered under the Securities Act of 1934, the offering price shall be the public offering price determined under such firm underwriting commitment by the parties thereto. For the purposes of this Subsection, a firm underwriting commitment shall not include an underwriting commitment subject to a "market out" or similar condition operative after the time of the commencement of the offering, which is based on something less than substantial or material changes in conditions deemed relevant by the parties, or otherwise subject to other than the usual or customary conditions, nor shall it include a firm underwriting commitment under which the commissioner may determine that the underwriter or syndicate of underwriters may not have the financial ability to perform such commitment in the light of its net capital position. The commissioner may require an applicant for registration to submit sufficient evidence to enable his determination under this standard to be made.

b. The offering price shall be reasonably related to the price at which similar securities of reasonably comparable companies in the same industry are being actively traded, subject to appropriate adjustment respecting dissimilarities between the companies being compared. Comparisons of companies may relate to relative sizes, products, earnings, financial history, management or other relevant factors, but must, in the aggregate, reflect a reasonable spectrum of companies in the particular industry. In the event the issuer does not fit into generally used industry classification, the "same industry" shall include such industries or segments of industries as most closely relate to the issuer's business. The commissioner will generally require an applicant for registration to submit sufficient evidence of such comparisons under this standard. An underwriter's memorandum evidencing a thorough and appropriate evaluation of the foregoing considerations may be used to provide such evidence, except the commissioner, in his discretion, may require more.

c. The offering price shall not exceed 25 times net earnings per share after taxes, or such higher price/earnings multiple as the commissioner may determine to be reasonable in light of the industry and/or the current general market. In determining the foregoing price/earnings multiple, the relevant net earnings per share shall be the net earnings per share for the last complete fiscal year of the issuer prior to the date of filing of application for registration as is set forth in the prospectus or offering circular. The net earnings per share for a portion of the current fiscal year may be considered relevant, provided:

i. that such portion is for at least a three-month period;

ii. that such portion of the current fiscal year and such comparable portion of the last complete fiscal year are adequately disclosed in the prospectus or offering circular; and

iii. that the net earnings per share for such portion added to the net earnings per share for the appropriate portion of the last complete fiscal year, equal a sum not less than one twenty-fifth of the offering price or such other fraction of the offering price as may be appropriate in the discretion of the commissioner when the proposed offering price is in excess of 25 times earnings as described above, the burden shall be on the applicant to provide information with respect to industry or current general market as may be sufficient to permit determination by the commissioner that the proposed price/earnings multiple is not excessive or not based on unsound business principles.

d. The offering price shall be reasonably related to the book value of the securities, with appropriate adjustment for the earnings history of the issuer and its general business and for reasonable appraisals or valuation of the market value of its assets, shown to the satisfaction of the commissioner. The commissioner may require an applicant for registration to submit sufficient information to make his determination under this standard.

La. Admin. Code tit. 10, § XIII-513

Adopted by the Commissioner of Securities, November 9, 1971.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:707 and R.S. 51:708.