By Christianne Grace F. Salonga and Urania Estrellita Amelia Remedios P. Lindo
The Securities and Exchange Commission (SEC) has issued the Guidelines for Cornerstone Investors in Initial Public Offerings dated 11 April 2024 (Guidelines). Cornerstone Investors play a crucial role in Initial Public Offerings (IPOs) as they boost demand for IPO shares and enhance the company’s credibility throughout the IPO process.
Under the Guidelines, a Cornerstone Investor is “an investor in the initial public offering of a registrant’s shares to whom offer shares are preferentially placed with a guaranteed allocation at the final offer price, provided that, the final offer price is within the offer price range preferred by the cornerstone investor and agreed with the issuer.”
Allocation to a Cornerstone Investor is secured through a Cornerstone Agreement, to be signed on or before the pricing event of the IPO. Essentially, the Cornerstone Investor commits to purchasing the allocation, provided the final price falls within the agreed-upon range. This Cornerstone Agreement is included in the material contracts submitted by the issuer to the SEC to support its registration statement.
The issuer is only allowed to provide Cornerstone Investors such information contained in the final prospectus. The issuer’s final prospectus must disclose the number of Cornerstone Investors, their respective profile descriptions, the number and type of securities proposed to be issued or offered to Cornerstone Investors, and any other relevant information regarding the cornerstone investment.
The allocation of Cornerstone Investors must be at the IPO price. Each Cornerstone Investor may be represented in the issuer’s board of directors, provided they own the minimum number of shares required for election.
For further details, a copy of the Guidelines may be accessed through the SEC’s website.
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