Many people do not realize that they may have reached the 10% threshold or even 20% (control person) based on post-conversion beneficial ownership which requires public filings (i.e. Early Warning Report).

In a nutshell, the holder’s stock options and warrants are calculated against the Issuer’s issued and outstanding securities including those stock options and warrants held by the holder only. Calculations do not to include the Issuer’s fully diluted numbers.

An Example

Example: Let’s call our investor Bill and the Issuer ABC Mining Inc. Bill owns 1,500,000 common shares, has been granted 500,000 stock options over the time he has been with ABC Mining and holds 300,000 share purchase warrants that he has purchased in private placements. ABC Mining has 21,350,000 in issued and outstanding common shares.

For Bill to calculate his post-conversion beneficial ownership he would take his common shares and add them to the total of all of his convertible securities that are available to be converted within 60 days (i.e. no restrictions that would prohibit Bill from converting these securities into securities with voting rights). This amounts to 800,000 stock options and share purchase warrants, combined, to come to an ownership of 2,300,000 securities.

Bill would then take ABC’s issued and outstanding common shares plus the number of HIS convertible securities (800,000) to get 22,150,000.

Now he takes his 2,300,000 (1,500,000 common shares, 500,000 stock options plus 300,000 share purchase warrants), and divides it into 22,150,000 (21,350,000 issued and outstanding shares plus HIS 500,000 stock options plus 300,000 share purchase warrants ) and the outcome is 10.38%.

If Bill were to check his percentage just using his common shares against ABC’s issued and outstanding he would think his ownership percentage was 7%, and he would be in error. His actual ownership percentage, as defined by the BCSC, would be 10.38%

Calculating Your Post-Conversion Beneficial Ownership Tool

To see if you meet the 10% threshold click here to request our interactive PDF that will allow you to calculate what your post-conversion beneficial ownership percentage is!

Additional Information & Resources Courtesy of the BCSC

For additional information and definitions for the applicable Policies, courtesy of the BCSC please see:

55-104 Insider Reporting Requirements and Exemptions [NI]

55-104 Insider Reporting Requirements and Exemptions [CP]

62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues [NI]

62-104 Take-Over Bids and Issuer Bids [MI]

 

Disclaimer:

This information is provided as an information service only and is not intended to substitute for competent professional advice. No action should be initiated without consulting a professional advisor.

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