Aurinia Pharmaceuticals Inc.
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the issuer bid requirements set out in Part 2 of NI 62-104 in connection with purchases by the issuer of up to 15% of its outstanding shares through the facilities of the NASDAQ under repurchase programs that the issuer may implement from time to time -- the shares are not listed on any Canadian exchange and are only listed and posted for trading on the NASDAQ -- the issuer bid will affect a limited number of Canadian shareholders -- requested relief granted, subject to certain conditions.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
Citation: Re Aurinia Pharmaceuticals Inc., 2024 ABASC 36
February 29, 2024
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
AURINIA PHARMACEUTICALS INC.
(the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirements applicable to issuer bids (the Issuer Bid Requirements) in Part 2 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104). The Exemption Sought would permit the purchase by the Filer of up to 15% of the Filer's outstanding common shares (the Shares) made through the facilities of the NASDAQ Global Market (the NASDAQ) within a 12-month period under repurchase programs that the Filer may implement from time to time (the Repurchase Programs)
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application)
(a) the Alberta Securities Commission is the principal regulator for this application,
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each province of Canada, other than the Jurisdictions, and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation amalgamated under, and governed by, the Business Corporations Act (Alberta). The head office of the Filer is located in Edmonton, Alberta. The Filer's other principal office is located in Rockville, Maryland.
2. The Filer is a reporting issuer in each province of Canada (the Reporting Jurisdictions) and is not in default of any requirements of the securities legislation of the Reporting Jurisdictions.
3. The Filer is also a registrant with the SEC and is subject to the requirements of the 1933 Act and the 1934 Act.
4. The Shares were voluntarily delisted from the Toronto Stock Exchange (the TSX) effective as of the close of trading on July 30, 2021. The Shares are no longer listed and posted for trading on any exchange in Canada. The Shares have been quoted on the NASDAQ since September 2, 2014 and trade under the symbol "AUPH".
5. The authorized capital of the Filer consists of an unlimited number of Shares. As at the close of business on February 9, 2024, the Filer had 143,840,262 Shares issued and outstanding.
6. The exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the Other Published Markets Exemption) provides that an issuer bid that is made in the normal course on a published market, other than a designated exchange, is exempt from the Issuer Bid Requirements if, among other things, the bid is for not more than 5% of the outstanding securities of a class of securities of the issuer and the aggregate number of securities acquired in reliance on the Other Published Markets Exemption by the issuer and any person acting jointly or in concert with the issuer within any period of 12 months does not exceed 5% of the outstanding securities of that class at the beginning of the 12-month period.
7. On February 14, 2024, the Filer approved a Repurchase Program of up to US$150 million which was publicly announced on February 15, 2024 (the Current Bid). Repurchases pursuant to the Current Bid may be made either in the open market or through private transactions, subject to market conditions, applicable legal requirements and other relevant factors. The Filer wishes to be able to continue to make repurchases under the Current Bid and any further Repurchase Programs that may be implemented by the Filer on the facilities of the NASDAQ in excess of the maximum allowable in reliance on the Other Published Markets Exemption (such repurchases, the Proposed Bids).
8. The Filer believes that the Proposed Bids are in the best interests of the Filer and its shareholders.
9. Based on information provided by the Filer's transfer agent, as at February 9, 2024
(a) the Filer had 143,840,262 Shares issued and outstanding,
(b) 122,637,004 Shares (or approximately 85.259% of the issued and outstanding Shares) were registered to shareholders in the United States,
(c) 21,201,465 Shares (or approximately 14.740% of the issued and outstanding Shares) were registered to shareholders in Canada (the Registered Canadian Shares),
(d) of the Registered Canadian Shares, 20,974,366 Shares were registered to The Canadian Depositary for Securities (the CDS Position), and 227,099 Shares (or approximately 0.158% of the issued and outstanding Shares) were held among 86 registered shareholders in Canada, and
(e) of the CDS Position, 16,131,693 Shares were held by American intermediaries (the U.S. Intermediary Shares), and 4,842,673 Shares (or approximately 3.367% of the issued and outstanding Shares) were held by Canadian intermediaries.
10. Based on reports obtained from Broadridge Investor Communication Solutions, the Filer reasonably believes that
(a) a total of 8,543,832 Shares, representing approximately 5.94% of the total number of Shares issued and outstanding, are beneficially owned by shareholders resident in Canada, and
(b) the size of the CDS Position, and the fact that the U.S. Intermediary Shares form part of the CDS Position, is likely a result of the Shares having been listed on Canadian exchanges for over 20 years.
11. The Proposed Bids will be effected in accordance with the 1933 Act, the 1934 Act, the rules of the SEC made pursuant thereto, including the safe harbour provided by Rule 10b-18 under the 1934 Act (collectively, the Applicable U.S. Securities Laws) and any applicable rules, regulations or policies of the NASDAQ (the Exchange Rules).
12. In order to have the benefit of the safe harbour provided by Rule 10b-18 under the 1934 Act
(a) all purchases made during a single trading day must be conducted through a single broker or dealer,
(b) purchases cannot be effected during the last 10 minutes before the scheduled close of market or be the opening purchase,
(c) purchases must be made at a price that does not exceed the highest independent bid or the last transaction price quoted, and
(d) in any given day, the issuer cannot purchase more than 25% of its average daily trading volume on the NASDAQ over the past four weeks.
13. Applicable U.S. Securities Laws also require that the Filer report any repurchases conducted pursuant to the Proposed Bids in its quarterly and annual reports.
14. The Proposed Bids would be permitted under the Exchange Rules and Applicable U.S. Securities Laws.
15. The purchase of Shares under the Proposed Bids will not adversely affect the Filer or the rights of any of the Filer's security holders and they will not materially affect control of the Filer.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that
(a) the Proposed Bids are permitted under the Exchange Rules and Applicable U.S. Securities Laws, and are established and conducted in accordance and compliance with the Exchange Rules and Applicable U.S. Securities Laws,
(b) the aggregate number of Shares acquired in reliance on this decision and the Other Published Markets Exemption by the Filer and any person acting jointly or in concert with the Filer within any period of 12 months does not exceed 15% of the outstanding Shares at the beginning of the 12-month period,
(c) the Shares are not listed and posted for trading on an exchange in Canada,
(d) the Exemption Sought applies only to the acquisition of Shares by the Filer occurring within 36 months of the date of this decision pursuant to a Proposed Bid,
(e) at least five days prior to purchasing Shares in reliance on this decision, the Filer discloses the terms of the Exemption Sought and the conditions applicable thereto in a press release that is issued and filed on SEDAR+ and includes such information as part of the news release required to be issued in accordance with the Other Published Markets Exemption in respect any Repurchase Program that may be implemented by the Filer, and
(f) the Filer does not acquire Shares in reliance on the Other Published Markets Exemption if the aggregate number of Shares purchased by the Filer and any person or company acting jointly or in concert with the Filer in reliance on this decision and the Other Published Markets Exemption within any period of 12 months exceeds 5% of the outstanding Shares at the beginning of the 12-month period.