Troodos Metals: tranche-by-tranche prospectus analysis and a late-breaking supplement
Troodos Metals plc has 40 million shares admitted to trading on the Cyprus Stock Exchange at €2.00 each. On 3 March it plans to launch a financing round: (i) €4.2 million placed with eight Cypriot and Greek institutions; (ii) €2.6 million offered to 140 retail clients of a Cypriot bank and €1.9 million to 210 retail investors in Greece through the same bank; (iii) €900,000 of shares issued to its 320 employees under an employee share plan; and (iv) a single €600,000 subscription from one private investor in a private placement carrying a minimum ticket of €100,000. Nine months ago Troodos raised €1.6 million from three institutions in a private placement, also without a prospectus. The finance director's position is that every tranche falls within a Prospectus Regulation exemption, that no document at all is needed for the employee shares because they are issued free of charge, and that because the new shares are only about 13% of the existing class, admission to trading needs no prospectus either.
1. Does a prospectus have to be published for this round, and for which parts? Address each tranche and separate the offer test from the admission test.
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Offer to the public - tranche by tranche (Regulation (EU) 2017/1129, Article 1(4)).
- (i) Eight institutions: exempt as an offer addressed solely to qualified investors (Art. 1(4)(a)); no cap.
- (ii) Cyprus leg: 140 retail investors, fewer than 150 persons in that Member State, so exempt under Art. 1(4)(b). The Greek leg is different: 210 retail investors exceeds 150 in Greece, so the exemption fails. The 150 limit is counted per Member State, not on the aggregate offer, and it counts persons, not amounts. A prospectus is therefore required unless that leg is restructured - for example by cutting it below 150 investors or enforcing the €100,000 minimum ticket of Art. 1(4)(c).
- (iii) Employees: exempt under Art. 1(4)(i), but not document-free. A document containing the number and nature of the securities and the reason for and details of the offer must be made available. The finance director's "free of charge" point confuses bonus/employee issues with an absence of documentation.
- (iv) €100,000 minimum ticket: exempt under Art. 1(4)(c).
- The €1 million de minimis exemption in Art. 1(4)(e) is unavailable: it is measured over 12 months for all offers by the issuer, and the earlier €1.6 million placement already exhausts it.
Admission to trading is a separate test. New shares need admission, but Art. 1(5)(a) exempts securities fungible with an existing admitted class representing less than 20% of that class over 12 months. Total new shares: €10.2 million ÷ €2.00 = 5.1 million, plus 0.8 million from the earlier placement = 5.9 million of 40 million, i.e. 14.75%. Admission is therefore exempt.
Conclusion. The admission exemption does not cure the offer problem: a prospectus is needed because of the Greek retail tranche.
2. Assume Troodos decides to publish a prospectus covering the whole round. What are the approval timeline, the passporting step for Greece, and the practical sequencing against a 3 March launch?
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Approval. The prospectus must be submitted to CySEC, which notifies its decision within 10 working days of a complete draft; that period extends to 20 working days where the competent authority needs to notify the applicant that the draft is incomplete. CySEC can only approve a prospectus that is complete, consistent and comprehensible, so the working-back timetable matters: the drafting, the accountants' and lawyers' consents, and the working-capital statement must be settled before submission, not during the review window.
Passporting to Greece. Once approved, CySEC, at the issuer's request, transmits the certificate of approval and a copy of the prospectus to the Hellenic Capital Market Commission, within three working days of approval. The prospectus may then be used to offer to the Greek retail investors. The prospectus must be drawn up in a language accepted by the Greek authority (English with a Greek summary is a common solution) and the summary must remain within its page limit.
Sequencing. With a 3 March launch, a filing that leaves only a few days for review is unrealistic: a 10-working-day clock alone consumes two calendar weeks, and any incompleteness notification resets it to 20 working days. The realistic plan is to file in early February, obtain approval in the second half of February, passport to Greece before 3 March, and publish the prospectus ahead of the offer opening.
Validity and use. Approval is valid for 12 months, but any material change during the offer period requires a supplement, and the prospectus must be published in the same manner as the offer is made.
3. On 20 February, after approval but before closing, due diligence reveals that a customer contract representing 22% of revenue will not be renewed and the board intends to announce this only after the round closes. What does the Prospectus Regulation require?
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The trigger. Article 23 applies where, after approval and before the closing of the offer, a significant new factor, material mistake or material inaccuracy arises that could affect the assessment of the securities. The loss of a contract generating 22% of revenue is exactly that kind of factor: it bears directly on the issuer's earnings, solvency and the accuracy of the figures in the prospectus.
The response. A supplement must be prepared and submitted to CySEC for approval without undue delay, and the competent authority is required to approve it within a short, fixed window (five working days). The supplement must be published in the same manner as the original prospectus, and the Greek passport must be updated so that Greek investors see the same document.
Investor rights. Investors who had already agreed to subscribe before the supplement was published have a right of withdrawal, exercisable within two working days of publication, provided the new factor arose before the closing of the offer or the delivery of the securities. The firm must tell them about this right at the same time as the supplement is published, and must not wait for investors to ask.
The board's proposal is not available. Withholding the information until after closing would (a) leave the prospectus inaccurate while investors are still subscribing, exposing the issuer and its directors to liability, and (b) create a second, market-abuse problem: the information would be inside information under MAR and would have to be disclosed under Article 17, with a possible delay available only on strict conditions and with notification to CySEC.
Practical consequence. Expect the withdrawal window to reopen subscription volumes; the timetable should be extended rather than the disclosure deferred.