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Nasdaq Listing Requirements...tough Set Of Standards...

raptor213

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In the S-1 filing, it says this on page 90 when they get around to Underwriting:

"
We have entered into an underwriting agreement with Drexel Hamilton, LLC, as representative of the underwriters named below, with respect to the shares subject to this offering. Subject to the terms and conditions in the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has, severally and not jointly, agreed to purchase from us on a firm commitment basis, the respective number of shares of our Common Stock set forth opposite its name in the table below:

Underwriters
Number of
Shares

Drexel Hamilton, LLC

The underwriting agreement provides that the obligation of the underwriters to purchase all of the shares being offered to the public is subject to approval of legal matters by counsel and the satisfaction of other conditions. These conditions include, among others, the continued accuracy of representations and warranties made by us in the underwriting agreement, delivery of legal opinions and the absence of any material changes in our assets, business or prospects after the date of this prospectus. The underwriters are obligated to purchase all of our shares in this offering, other than those covered by the over-allotment option described below, if they purchase any of our shares. The underwriting agreement also provides that if an underwriter defaults, the representative will have the right within hours after such default to make alternative arrangements for one or more non-defaulting underwriters, or any other underwriters, to purchase all, but not less than all, of the commitments of the defaulting underwriter. If the representative is unable to complete such arrangements within such -hour period, the representative may terminate the offering if the commitment of the defaulting underwriter exceeds % of the aggregate commitment of the underwriters, otherwise the purchase commitments of the non-defaulting underwriters will be proportionately increased. If a new underwriter or underwriters are substituted for a defaulting underwriter, the Company or the non-defaulting underwriters will have the right to postpone the closing for a period of up to five business days in order that any necessary changes in this registration statement and prospectus and other documents may be effected.
"

I didn't realize the phrase 'firm commitment basis' had significance until my own personal doubts piqued further interest in the matter.

Elio Motors seeks to raise $100M in their NASDAQ IPO, if approved to list publicly. I recall the Regulation A+ offering in which they had sought to raise a stated goal of $25M but instead only managed to raise about $17M. This was underwritten in a 'best efforts' fashion, so I've learned. I naively and somewhat spritely figured that a similar event would unfold this time, with negative press and a treasure trove of click-bait *reporting* articles to be found online.

(Seriously, given their track record, who would pony up money and hand it to Elio Motors? They state clearly in their prospectus that no less than $4M of any potential offering proceeds are already earmarked towards debt installment payments and overdue interest payments. I envisioned a scenario in which the company sought $100M but only acquired, say, $20M, a figure insufficient to even kickstart the 76-week timeline to manufacturing production.)

As it turns out, if the NASDAQ committee approves the application to list publicly on their exchange, Elio Motors as the issuer of the stock offering stands to receive the full $100M up-front (less any fees/commissions and the like). The investment bank that is underwriting the offering - Drexel Hamilton, LLC - would buy the full face value with the intention of turning around and acting as an agent itself or partnering with dealers to resell the securities to the public.

Two facets of this arrangement immediately pop out at me:

First, Elio Motors stands to receive either zero, or the net proceeds from a $100M stock offering, nothing inbetween. I happen to trust that the management team at Elio Motors wouldn't have pursued this avenue unless they were somewhat certain in their ability to qualify to be listed. So if a green light is given, they immediately find themselves with $100M, less fees/commissions/expenses/etc.

Second, I'd also be surprised to find out that Drexel Hamilton doesn't already have institutional investment partners lined up and ready to sell lots of ELIO securities to. I can't imagine a firm like theirs would pony up $100M without some Letters of Intent, Memoranda of Understanding, Conditional Sales Contracts, etc already drafted and assurances made in writing.

With the NASDAQ approval knocking on the door any day now (6+ weeks have already elapsed since the 08/03/17 application submittal date), I find myself somewhat reinvigorated about Elio Motors' prospects moving forward.

Could $100M in liquid cash assets be the unicorn Elio Motors has been waiting for to meet the DoE ATVM Loan Programs Office's litmus test for financial viability? Could the company suddenly find themselves the recipients of a $100M public stock offering AND a $186M ATVM loan disbursement?
 

Samalross

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It looks like if Elio can get listed on Nasdaq they will get approx. 92 million from Drexel. If they can't get listed they will get zero. For Drexel to risk 92 million to make 8 million they must be confident that they can get subscribers. Looks like Elio has some items to work out to get the listing, they have two weeks to fix.
 

raptor213

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I didn't realize the phrase 'firm commitment basis' had significance until my own personal doubts piqued further interest in the matter.

Elio Motors seeks to raise $100M in their NASDAQ IPO, if approved to list publicly. I recall the Regulation A+ offering in which they had sought to raise a stated goal of $25M but instead only managed to raise about $17M. This was underwritten in a 'best efforts' fashion, so I've learned. I naively and somewhat spritely figured that a similar event would unfold this time, with negative press and a treasure trove of click-bait *reporting* articles to be found online.

(Seriously, given their track record, who would pony up money and hand it to Elio Motors? They state clearly in their prospectus that no less than $4M of any potential offering proceeds are already earmarked towards debt installment payments and overdue interest payments. I envisioned a scenario in which the company sought $100M but only acquired, say, $20M, a figure insufficient to even kickstart the 76-week timeline to manufacturing production.)

As it turns out, if the NASDAQ committee approves the application to list publicly on their exchange, Elio Motors as the issuer of the stock offering stands to receive the full $100M up-front (less any fees/commissions and the like). The investment bank that is underwriting the offering - Drexel Hamilton, LLC - would buy the full face value with the intention of turning around and acting as an agent itself or partnering with dealers to resell the securities to the public.

Two facets of this arrangement immediately pop out at me:

First, Elio Motors stands to receive either zero, or the net proceeds from a $100M stock offering, nothing inbetween. I happen to trust that the management team at Elio Motors wouldn't have pursued this avenue unless they were somewhat certain in their ability to qualify to be listed. So if a green light is given, they immediately find themselves with $100M, less fees/commissions/expenses/etc.

Second, I'd also be surprised to find out that Drexel Hamilton doesn't already have institutional investment partners lined up and ready to sell lots of ELIO securities to. I can't imagine a firm like theirs would pony up $100M without some Letters of Intent, Memoranda of Understanding, Conditional Sales Contracts, etc already drafted and assurances made in writing.

With the NASDAQ approval knocking on the door any day now (6+ weeks have already elapsed since the 08/03/17 application submittal date), I find myself somewhat reinvigorated about Elio Motors' prospects moving forward.

Could $100M in liquid cash assets be the unicorn Elio Motors has been waiting for to meet the DoE ATVM Loan Programs Office's litmus test for financial viability? Could the company suddenly find themselves the recipients of a $100M public stock offering AND a $186M ATVM loan disbursement?

Context for basis of discussion: http://www.investopedia.com/study-g...te-securities/types-underwriting-commitments/

"Best Efforts" Underwriting --
(previous Regulation A+ public offering, ask of $25M, $17M in shares sold)

"In a best efforts underwriting, the underwriters will do their best to sell all of the securities that are being offered by the issuer, but in no way is the underwriter obligated to purchase the securities for their own account. The lower the demand for an issue, the greater likelihood that it will be done on a best efforts basis. Any shares or bonds in a best efforts underwriting that have not been sold will be returned to the issuer."

"Firm Commitment" Underwriting --
(present NASDAQ Global exchange offering, ask of $100M, guaranteed by Drexel Hamilton, LLC)

"In a firm commitment underwriting, the underwriter guarantees to purchase all of the securities being offered for sale by the issuer regardless of whether or not they can sell them to investors. A firm commitment underwriting agreement is the most desirable for the issuer because it guarantees them all of their money right away. The more in demand the offering is, the more likely it is that it will be done on a firm commitment basis. In a firm commitment, the underwriter puts their own money at risk if they can’t sell the securities to investors."
 

Samalross

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Context for basis of discussion: http://www.investopedia.com/study-g...te-securities/types-underwriting-commitments/

"Best Efforts" Underwriting --
(previous Regulation A+ public offering, ask of $25M, $17M in shares sold)

"In a best efforts underwriting, the underwriters will do their best to sell all of the securities that are being offered by the issuer, but in no way is the underwriter obligated to purchase the securities for their own account. The lower the demand for an issue, the greater likelihood that it will be done on a best efforts basis. Any shares or bonds in a best efforts underwriting that have not been sold will be returned to the issuer."

"Firm Commitment" Underwriting --
(present NASDAQ Global exchange offering, ask of $100M, guaranteed by Drexel Hamilton, LLC)

"In a firm commitment underwriting, the underwriter guarantees to purchase all of the securities being offered for sale by the issuer regardless of whether or not they can sell them to investors. A firm commitment underwriting agreement is the most desirable for the issuer because it guarantees them all of their money right away. The more in demand the offering is, the more likely it is that it will be done on a firm commitment basis. In a firm commitment, the underwriter puts their own money at risk if they can’t sell the securities to investors."
Firm commitment pays very well for the underwriter. They can make many millions, best effort they would probably only get about a million. For Drexel a million is chump change.
 

Rob Croson

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Good find. However, it sounds like Drexel Hamilton is not an underwriter, but only represents the underwriters.

"...Drexel Hamilton, LLC, as representative of the underwriters named below..."

There are a lot of blanks in the agreement that will be filled in later. It looks like the identities of the underwriters have not yet been revealed.
 

Donnyboy

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It's 12:20am on Friday morning and I haven't heard anything yet. It's the end of the timeline for getting listed on NASDAQ. Maybe we'll hear from Paul or NASDAQ later this morning.
 
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