Prospectus Directive: ESMA publishes Q&A regarding “straddling” public offers

ESMA has helpfully clarified that it is permissible for an issuer to commence a public offer of non-equity securities under an existing base prospectus where the period of the public offer will continue after such base prospectus has expired, if the following conditions are met:

• the public offer must have a fixed start date and a fixed expected end date
• the issuer must have a complete and up-to-date base prospectus at all times during the offer period, and
• the issuer should have a new base prospectus approved and published before the earlier base prospectus expires (no later than the last day of validity of the earlier base prospectus).

ESMA takes this opportunity to remind issuers that being in the process of updating a base prospectus does not excuse an issuer’s obligation to keep the earlier base prospectus up-to-date by way of supplements until the end of the validity of the earlier base prospectus.

In respect of any “straddling” public offers, ESMA states that after the new base prospectus has been approved, an issuer may publish and file a new set of final terms referring to the new base prospectus.

Alternatively, if the issuer wishes to continue to use the final terms relating to the earlier base prospectus:

• the updated base prospectus should include or incorporate by reference the form of the final terms from the earlier base prospectus
• the updated base prospectus should identify the securities which are currently in their offer period by listing the ISINs and specify where the final terms of those securities are published, and
• the final terms relating to the earlier base prospectus should contain a prominent warning on the first page indicating the last day of validity of the earlier base prospectus and where the updated base prospectus will be published.

Comment

The issue of how to document “straddling” public offers has been a concern of the retail structured products market for some time so the ESMA guidance on this matter is most welcomed. It is worth noting that “straddling” public offers is also expressly permitted in the Commission’s Legislative Proposal to modernise the Prospectus Directive (PD3). As the timing of PD3 however is currently unclear, the ESMA guidance is helpful.