Legal Definitions - price amendment

A price amendment is a formal adjustment made to the official documents that companies file when they are preparing to sell new securities (like stocks or bonds) to the public. These adjustments specifically concern the financial details of the offering, such as the initial price at which the securities will be sold, the fees paid to the financial firms managing the sale, or the total amount of money the company expects to raise from the offering.

• Example 1: Adjusting IPO Price Due to Market Volatility

  Scenario: "InnovateTech Inc." is planning its Initial Public Offering (IPO), intending to sell shares at $20 each. Just before the final offering, a major economic report indicates a significant slowdown in the tech sector, causing investor sentiment to cool. To ensure the IPO is successful and attracts enough buyers, InnovateTech Inc. decides to reduce the offering price to $18 per share.

  Explanation: This change in the per-share offering price directly impacts the financial terms of the sale. InnovateTech Inc. would file a price amendment to update its prospectus with the new, lower share price, reflecting the adjusted market conditions and ensuring transparency for potential investors.

• Example 2: Modifying Underwriting Fees for a Bond Offering

  Scenario: A large utility company, "PowerGrid Corp.," is issuing new corporate bonds to fund infrastructure projects. Initially, they agreed to pay their investment bank a 2% commission for underwriting and selling the bonds. However, due to unexpectedly high demand from institutional investors, the investment bank agrees to reduce its commission to 1.5%.

  Explanation: The reduction in the underwriting commission directly affects the "underwriting and selling discounts or commissions" and, consequently, the "amount of proceeds" PowerGrid Corp. will receive from the bond sale. This financial adjustment requires a price amendment to be filed, updating the offering documents with the revised fee structure.

• Example 3: Changing Conversion Terms for Convertible Notes

  Scenario: "BioPharma Solutions," a biotechnology firm, is offering convertible notes, which are bonds that can be converted into shares of the company's stock under certain conditions. Initially, the conversion rate was set at 100 shares for every $1,000 note. After receiving feedback from potential investors indicating a preference for more favorable conversion terms, BioPharma Solutions decides to adjust the rate to 110 shares per $1,000 note to make the offering more attractive.

  Explanation: This alteration to the "conversion rates" directly relates to the value and potential future price of the securities being offered. BioPharma Solutions would need to file a price amendment to formally document this change in the offering's terms within its registration statement or prospectus supplement.