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Relevant Laws

Title:Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms (2016.04.12)
Article 16     With the exceptions of secondary distribution cases and underwriting cases conducted by means of competitive auction for warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants by a listed or OTC company, when the underwriting of securities is undertaken entirely by competitive auction and the total number of securities awarded by tender reaches the full amount available for allocation, the price at which the security opens on its first day of listing and the price paid by the underwriter for units retained for its own account shall be computed as the weighted average of the bid price of all successful bids (decimals beyond cents shall be rounded up or down), and shall be capped at a certain multiple of the minimum offering price set under Article 8, paragraph 1, subparagraph 2.
    The certain multiple referred to in the preceding paragraph shall be determined by negotiation between the underwriting syndicate and the issuing company, but may not exceed a multiple of 1.3.
Article 17      In the underwriting of securities undertaken partly by competitive auction and partly by public subscription, when the total number of securities awarded by competitive auction reaches the full amount available for allocation, the offering price of those units allocated by public subscription and those retained by the underwriter for its own account shall be computed as the weighted average of the bid price of all successful bids (decimals beyond cents shall be rounded up or down), and shall be capped at a certain multiple of the minimum offering price set under Article 8, paragraph 1, subparagraph 2.
    The certain multiple referred to in the preceding paragraph shall be determined by negotiation between the underwriting syndicate and the issuing company, but may not exceed a multiple of 1.3.
    With the exception of secondary distribution cases or where otherwise provided under law, the price at which the security opens on its first day of listing shall be the price underwritten for public subscription as determined in the preceding paragraph.
Article 18      In the underwriting of securities by competitive auction, if the total number of securities bid for is insufficient to cover the number of securities offered through competitive auction, then the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, shall serve as the offering price for those securities that remain unallocated after competitive auction, those securities retained by the underwriter for its own account, and those securities allocated through public subscription. Units that remain unsubscribed after conclusion of competitive auction shall be allocated as prescribed by Article 8 paragraph 1 subparagraph 6.
    Except for the underwriting of a secondary distribution or of a capital increase by listed or OTC companies involving a cash capital increase, the price at which the security opens on its first day of listing shall be the offering price set forth under the preceding paragraph.
    In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market conducted by competitive auction, if the total number of securities bid for in valid bids is insufficient to cover the all the securities put up through the competitive auction in question, the TWSE will not conduct the opening of bids.
     In an underwriting case under the preceding paragraph, if there is to be newly conducted any competitive auction or book building or public subscription, this fact must be stated when making the respective filing with the Taiwan Securities Association in accordance with Articles 8 and 9, 23, 24, or 53.
Article 30     Unless the determination of the offering price for underwritten securities is undertaken as prescribed in Section One or Two, a reference price shall be determined in accordance with another reasonable pricing method. Thereupon the underwriter shall resolve the offering price by negotiations with the issuing company (issuing institution) or the holder of said securities.
    Prior to an initial listing on a stock exchange (or OTC) market, underwriting shall give adequate consideration to the company's most recent financial status, and in addition to setting the offering price on the basis of information gathered during book building, prices on the Emerging Stock Market over the preceding month, and a research report furnished by the lead and co-underwriters, a reasonable explanation of the offering price shall also be provided. In the case of underwriting employing book building, the offering price may not be less than 70 percent of the simple arithmetic mean trade price for the 10 business days in which trades have been executed in Emerging Stock trading after the book building agreement has been registered with the Taiwan Securities Association. If there is a difference of 50 percent between the offering price and the closing price on the Emerging Stock Market for the business day preceding the pricing date, a concrete explanation of the reasons for the pricing shall be provided.
    When an underwriting case handled by a foreign issuer involving a primary listing on a stock exchange or OTC market is a case of application for listing on the stock exchange or OTC market under the guidance of a securities firm, the offering price shall be set on the basis of information gathered during book building, and a research report furnished by the lead and co-underwriters, and a reasonable explanation of the offering price shall be provided
    In an underwriting case involving cash capital increase by an emerging stock company, the offering price shall be set not lower than the net value per share as reported in the financial report for the most recent fiscal period, audited and attested or reviewed by a CPA, and shall take into consideration the average price calculated by dividing the sum of the trading value of the common shares of that emerging stock as shown in the Emerging Stock Computerized Price Negotiation and Click System on each day for a period of 30 business days immediately before the submission of the underwriting contract to the Association for recordation, by the sum of the numbers of shares traded on each business day, and a reasonable explanation of the offering price shall be provided.