Company: Net Roadshow, Inc.
Public Availability Date: January 30, 1998
Reference:
Securities Act of 1933, Section 4(1), Rule 144A
INQUIRY LETTER
TROUTMAN SANDERS LLP
ORIGINAL TEXT ILLEGIBLE PEACHTREE STREET, N.E. SUITE ORIGINAL TEXT ILLEGIBLE
ATLANTA, GEORGIA 30308
January 20, 1998
Catherine T. Dixon, Chief Counsel
Division of Corporation Finance
U. S. Securities and Exchange Commission
Mail Stop 3-3
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: No Action Request
Rule 144A of the Securities Act of 1933,
as amended (the "Securities Act" or the "Act")
Dear Ms. Dixon:
This firm serves as counsel to Net Roadshow, Inc. (the "Company"). The
Company desires to transmit, over the Internet, road shows that relate to
offerings of securities made solely to "qualified institutional buyers" (or "QIBs"
as such term is defined in Rule 144A(a)(1)) pursuant to Rule 144A under the
Securities Act of 1933 (the "Act"). We would appreciate confirmation, in the
form of a no-action response from the staff, of our opinion that the Company's
transmission of a "Rule 144A Road Show" on behalf of a "Seller" (as these terms
are defined below) is consistent with Rule 144A(d)(1) of the Act.
FACTUAL BACKGROUND
The format and flow of the requested Internet road show product is as
follows:
1. For the purposes of this letter, any road show that the Company will
transmit over the Internet will relate to unregistered securities offered and/or
sold exclusively to QIBs by a "Seller", which term, for purposes of this letter,
refers to a QIB (or person acting on its behalf) that purchases such securities
from the issuer for resale to other QIBs under Rule 144A ("Rule 144A Road
Show").
2. The Company will obtain from each Seller confirmation that such
Seller is a QIB, and that such Seller reasonably believes that:
(i) the offering to which the Rule 144A Road Show pertains is not
subject to registration under the Securities Act; and
(ii) only entities satisfying the Rule 144A(a)(1) definition of "QIB"
will be permitted password-restricted access to a Rule 144A Road Show.
3. The Company will maintain a website accessible only to entities that
the Seller has identified as QIBs eligible to participate in a particular
offering and the corresponding road show. The Seller first will provide to the
Company the "confirmation" described in paragraph 2, above, for each Rule 144A
Road Show that the Company is to transmit, whereupon the Company will provide to
the Seller, and the Seller will assign to each QIB, a confidential password, or
restricted access code, necessary to gain access to that Rule 144A Road Show.
Each QIB's password will be valid only for that road show, and will expire no
later than the date of termination of the related offering.
4. Each Rule 144A Road Show presented on the Company's website would be
the same road show that representatives of the QIBs attending the actual road
show see live, as the live road show will be filmed in its entirety, including
the filming of all questions and answers. The Company's transmission of the live
road show will not be edited for content, and QIBs that enter the Company's
website via the assigned password will generally view the road show in its
entirety.
1 The Internet version of the road show will present the charts and
oral presentation at a similar speed (like a slide show) as the live road show.
In the event information changes between the time the road show is filmed and
throughout the period that such road show is available on the website, the
display will include a periodic crawl providing a synopsis of such changes. The
crawl will also provide that the viewer may contact the appropriate
representative of the Seller for further information about such changes.
The Offering Memorandum regarding each offering will be displayed at all
times throughout the related road show. A viewer would simply "click" on the
"button" featuring the Offering Memorandum to view it in its entirety.
5. Before viewing any road show, each QIB will be advised of, and must
agree to, the following:
The offeree has provided the Seller with such information as has been requested
by the Seller to determine whether the offeree is a "qualified institutional
buyer" as defined in Rule 144A(a)(1) of the Securities Act of 1933, as amended.
The confidential password assigned by the Seller has not been disclosed to any
person or entity other than an employee or authorized agent of the offeree.
The distribution of any road show material to any person or entity other than an
employee or authorized agent of the QIB is not permitted.
It is strongly recommended that each investor read the Offering Memorandum
before making an investment decision.
The Offering Memorandum relating to this offering is available through this site
for viewing before viewing the road show. The Offering Memorandum may be
obtained by clicking on the button labeled "OFFERING MEMORANDUM." Viewers should
refer to the Offering Memorandum for more complete information about the
offering.
In the event the viewer does not agree to the above, the viewer will be
denied access to the road show. The screen, throughout each road show, would
also carry a disclaimer at all times stating that "the distribution of any road
show material is not permitted."
6. Each QIB will be able to view and print the entire Offering
Memorandum, or any portion thereof. As discussed above, each QIB will be advised
that the road show materials may not be distributed to any person or entity
other than an employee or authorized agent of the QIB.
7. The viewer will be informed by a periodic crawl across the screen or
by prominent text of the importance of viewing the entire Offering Memorandum.
8. The compensation to be received by the Company for the presentation
of road shows over the Internet will not be contingent upon the degree of
success of an underlying offering and will not be related to the size of an
offering. The fees charged by the Company will be analogous to a production or
printing cost in that the fees will be charged for the production of the
material to be transmitted over the Internet. The Company's fees may vary
depending upon whether the road show presentation is (i) produced but not
transmitted, or (ii) produced and transmitted for any period of time.
9. We believe that the following benefits would be recognized in the
marketplace if the Commission approves the no-action request:
(i) The Company believes this process would "level the playing field" by
providing all QIBs invited to review the road show with the opportunity to view
the road show at a time which is convenient to them;
(ii) QIBs located in geographic areas frequently missed by the live road
show would be placed on more equal footing with other QIBs;
(iii) There would be wider availability of the road show and the
Offering Memorandum to interested QIBs; and
(iv) The road show and the Offering Memorandum should be available to
QIBs on a more timely basis, providing the QIBs with more time to make a fully
informed investment decision.
LEGAL ANALYSIS
In IPONET, Interpretive Letter dated July 26, 1996, the staff
indicated that the private offering of securities on a password protected
website to accredited investors would not constitute a "general solicitation" or
"general advertising" within the meaning of Rule 502(c) of Regulation D. There,
the requestor indicated that it would post notices of private offerings of
securities, and the offerings themselves, on a website which would be
password-protected and therefore accessible only to those previously qualified
as accredited investors.
The Company will operate with substantially the same procedures as those
discussed in IPONET by limiting access to QIBs when transmitting Rule 144A Road
Shows. This website, which will both identify and contain the road show
presentations, will be password-protected. The only parties provided with a
password, and therefore allowed access to the Company's website to view the road
show transmissions, will be entities which a Seller has confirmed it reasonably
believes to be QIBs. As noted, the Seller also must confirm to the Company that
it is a QIB. Based upon the staff's position in IPONET, we believe that
electronic transmission of Rule 144A Road Shows (see paragraph 1 above) pursuant
to a website protected by an access code system should suffice to ensure that
all offers pursuant to a road show will be made exclusively to QIBs. See Rule
144A(d)(1).
The staff also addressed issues relating to the offering of securities
under Rule 144A by electronic means in The Institutional Real Estate Clearing
House ("IREC"), No Action Letter dated May 28, 1996.
2 In IREC, the staff indicated that it would not take enforcement
action against an entity facilitating the trading of unregistered securities in
the Rule 144A secondary market through the operation of a closed, screen-based
information system. The staff's response was conditioned in part on the
requirement that the only parties allowed to offer and sell securities under
Rule 144A through the system were entities qualified as QIBs under Rule 144A.
The Company's proposal to transmit information related to Rule 144A Road
Shows is also comparable to the IREC facts and circumstances. In both
situations, Sellers that are QIBs would offering Rule 144A securities through a
password-protected system to prospective purchasers reasonably believed by the
Seller to be QIBs. In contrast with both IREC and IPONET, however, the Company's
proposal will not allow the viewer to purchase securities via the Company's
website. Instead, any viewer that decides to purchase the securities that are
the subject of particular Rule 144A Road Show will be required to consummate the
transaction with the Seller alone, independently of and without any involvement
by the Company.
CONCLUSION
The Company's presentation of a Rule 144A Road Show by means of the
Internet as described herein, should be permissible because access to each such
presentation will be limited solely to QIBs.
3 We believe that the proposal of the Company would conform with the
present practice in the securities industry of conducting road shows in
connection with offerings made to entities which the Seller reasonably believes
to be QIBs in accordance with Rule 144A of the Act, with the only difference
being that the "live" road shows would be presented electronically.
Based on the foregoing facts and analysis, we believe that the Company's
system limiting access to Rule 144A Road Shows transmitted over the Company's
website to entities which a Seller reasonably believes to be QIBs as described
herein is consistent with Rule 144A(d)(1). We respectfully request that the
Division agree not to recommend that the Commission take enforcement action
against the Company if it establishes and operates the system described above.
If you wish additional information, or believe that additional representations
or clarifications as to the proposed transaction are required before issuing the
No Action Response, we would appreciate your contacting us.
Thank you for your review of this No-Action Letter Request.
Sincerely,
Thomas M. Duffy for
Troutman Sanders LLP
TMD:llt
STAFF REPLY LETTER
January 30, 1998
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Net Roadshow, Inc. (the "Company")
Incoming letter dated January 20, 1998
Based on the facts presented in your letter, and your counsel's opinion
that the activities described in your letter are consistent with Rule 144A(d)(1)
under the Securities Act of 1933 (the "Act"), the Division will not recommend
enforcement action to the Commission if the Company transmits road shows over
its Internet website, on behalf of a "Seller" (as that term defined in your
letter), solely to "qualified institutional buyers" ("QIBS") within the meaning
of Rule 144A(a)(1) under the Act. Moreover, the staff's no-action position is
predicated on the Company's compliance with the following conditions in
connection with each "Rule 144A Road Show" (as defined in your letter):
(A) the Company will deny access to its website for viewing of a particular road
show (which road show shall be deemed to include the posting of any notice
thereof on the Company's web site) to all persons or entities (other than
employees or authorized agents of the Company or Seller for that road show),
except those institutions for which the Seller has confirmed its reasonable
belief regarding their QIB status (see Rule 144A(d)(1)).
(B) the confidential password assigned to QIBs for a particular road show will
be unique to that road show, and will expire no later than the date of
termination of the related offering.
(C) each Seller's "confirmation" to the Company (as described in your letter)
will include the following:
(1) a representation that such Seller is a QIB within the meaning of Rule
144A(a)(1); and
(2) an adequate basis for such Seller's representations of its "reasonable
belief" that:
(i) each entity to which the Seller has assigned a confidential password is a
QIB; and
(ii) the offering to which the particular road show relates is not subject to
registration under the Securities Act.
(D) the Company otherwise has no actual knowledge, or reason to believe, that:
(1) the Seller is not a QIB;
(2) any of the entities to which the Seller has assigned a confidential password
is not a QIB; or
(3) the securities offering to which a particular road show relates is subject
to registration under Section 5 of the Securities Act.
(E) the Company is not an affiliate of any Seller or issuer of a security that
is the subject of a particular road show.
This position is based on the facts and circumstances outlined in your
letter, as well as your counsel's opinion as described therein. Accordingly, any
different facts or conditions might require a different conclusion. In addition,
this response expresses the Division's position on enforcement action only, and
as such does not express any legal conclusion on the question presented.
Finally, because regulatory responses to legal issues raised by technological
developments may evolve, you should be aware that this no-action position may be
reevaluated in the future by either the staff or the Commission.
Sincerely,
Catherine T. Dixon
Chief Counsel
1The Company reserves the right to edit out "dead time" arising
through logistical, organizational, or similar problems at live road shows and
to give the Seller (and/or the issuer, as applicable) the opportunity to edit
out misstatements or mistakes.
2The Company acknowledges that the staff did not specifically address
issues relating to the Act in this letter and the letter is limited to the
issues addressed therein.
3The Rule 144A Road Show presentations remain subject to the
anti-fraud and the anti-manipulation provisions of the Act and the Securities
Exchange Act of 1934, as amended.