Legal Definitions - mini-maxi

A mini-maxi is a specific type of agreement used when a company wants to sell new investments, such as shares or bonds, to the public. It establishes a two-tiered approach for the sale:

• First, a minimum number of investments must be sold for the entire offering to proceed. If this minimum is not met by a specified deadline, the deal is canceled, and all investor money is returned. This part operates on an "all-or-none" basis.
• Second, once the minimum threshold is reached, the broker or financial firm selling the investments will then make their best efforts to sell additional investments, up to a predetermined maximum amount. For these additional sales, the broker is not obligated to sell every single unit, but they commit to diligently trying to find buyers.

This arrangement provides assurance to the company that it will receive at least a critical amount of funding, while also allowing for the possibility of raising more capital if market demand is strong.

Examples:

• Startup Funding Round: Imagine a new technology startup aiming to raise capital to develop its product. They need at least $750,000 to cover essential development costs and launch their initial version (the "mini"). They engage an investment bank to sell shares to investors. The agreement is a mini-maxi: if the bank doesn't sell at least $750,000 worth of shares, the entire funding round is canceled, and all committed funds are returned to investors. However, if they successfully raise $750,000, the bank will then continue to market shares, using its best efforts, to raise up to a total of $1.5 million (the "maxi") to fund future expansion and marketing initiatives.

  Explanation: This illustrates how the startup ensures it secures the critical minimum funding needed to operate, while also leveraging the bank's efforts to potentially raise more capital for growth, without the bank being absolutely bound to sell the full maximum amount.

• Real Estate Development Project: A real estate developer plans to build a new apartment complex and needs to raise funds from private investors. They determine that a minimum of $5 million is required to acquire the land and secure initial permits (the "mini"). They hire a brokerage firm to sell investment units in the project. The mini-maxi agreement states that if the firm cannot secure commitments for at least $5 million, the project will not proceed, and all investor money will be refunded. If they hit the $5 million mark, the firm will then continue to seek investors, on a best-efforts basis, to raise up to $8 million (the "maxi") to cover additional construction phases and amenities.

  Explanation: Here, the mini-maxi structure guarantees the developer has the essential funds to start the project, while also providing a mechanism to raise additional capital for a more comprehensive development if investor interest allows, without the brokerage firm being fully liable for the entire maximum.