All About Private Placements - Part 3

Maurice Jackson: I've gotten the legend removed and I now have the ability to sell my shares, but also the price has increased. Let's use this scenario that we discussed earlier with Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX). I bought it at 66 cents. The warrant, I can exercise it for one year at 90 cents, and the stock price is now at $7. How do I exercise this warrant?

Tekoa Da Silva: Exercising a warrant obtained by private placement. So, the broker that you use, who hopefully shows themselves to be very competent and really knows their stuff, will have a specific procedure laid out to you where they can say, "This is the form that you need to fill out." Well, I'll come back to that in just a second, but they'll say, "This is the form that you need to fill out here saying deliver us the funds and here's what our process is going to be once we get those two items from you." And I'll describe my observation of how that process works, but first I'll say if we go back to here's the form that you need to fill out to exercise your warrant, I would say when a person wants to participate in a private placement, they get an agreement called a subscription agreement from the issuer.

It's a 30 or 40 page document. If you look at the end of that document, there's usually a page right in there. It's an appendix page usually and it says exercise warrant or warrant exercise form. They'll include it right in there sometimes and you look at it and you basically write the certificate number of your warrant certificate in there, you sign it and you deliver that with the funds to the issuer. So you can forward the processing fees to the issuer by bank wire and then send them the warrant exercise form. I believe they have any ability to exercise your warrant without them actually having possession of the original warrant certificate because they'll just cancel out the number once they exercise it.

And so that's one way to do it. Another way to do it is if the broker says, "Here's how you exercise it, you can give us these forms. Here's how you give us the cash and then we'll take care of it for you." They would essentially be doing the same thing, using their clearinghouse bank. If their clearinghouse bank has your warrant certificate deposited in a vault, that just means that they'll have somebody go in there and pull out the certificate, put it with some funds and then send it to the issuer that way. And then the issuer, they get started with their legal process working with the transfer agent and having the stock certificate. If you're exercising the warrant to buy common shares, they'll get to work to create the stock certificate at the transfer agent. And then once that stock certificate is produced, you're back at step number one with regard to depositing traditionally or your regular deposit process with stock certificates have been obtained by private placement and your broker will have that instruction set out for you.

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Disclosure: I or members of my family own shares of Novo Resources.

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