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Gran Tierra Energy Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 62-104 Take-Over Bids and Issuer Bids -- relief from the formal issuer bid requirements in NI 62-104 -- issuer conducting a normal course issuer bid through the facilities of the TSX and NYSE American -- relief granted, provided that purchases are subject to a maximum aggregate limit mirroring the TSX NCIB rules.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
Citation: Re Gran Tierra Energy Inc., 2024 ABASC 24
February 12, 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
GRAN TIERRA ENERGY 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 under the securities legislation of the Jurisdictions (the Legislation) that the requirements contained in the Legislation relating to issuer bids (the Issuer Bid Requirements) shall not apply to purchases of the Filer's shares of Common Stock, par value $0.001 per share (the Shares) made by the Filer through the facilities of the NYSE American and over alternative trading platforms based in the United States (together with the NYSE American, the U.S. Markets) in connection with an issuer bid made in the normal course through the facilities of the Toronto Stock Exchange (the TSX) that the Filer may implement from time to time (such bids, the Normal Course Issuer Bids, and such exemption, the Exemption Sought).
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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador; and
(c) this 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 incorporated under the laws of the State of Delaware and is in good standing.
2. The principal executive offices of the Filer are located in Calgary, Alberta.
3. The Filer is a reporting issuer in each of the provinces of Canada and is an "SEC foreign issuer" as defined under National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers. The Filer is not in default of securities legislation in any of the jurisdictions in which it is a reporting issuer.
4. The Shares are registered under the 1934 Act and the Filer is subject to the requirements of the 1934 Act. The Filer is not in default of any applicable securities laws in the United States.
5. The authorized capital of the Filer consists of 82 million shares of capital stock, of which 57 million is designated as Shares, and 25 million is designated as Preferred Stock, par value $0.001 per share. As at December 31, 2023, there were 32,246,501 Shares and no Preferred Stock issued and outstanding.
6. The Shares are listed and posted for trading on each of the TSX, the NYSE American and the London Stock Exchange under the trading symbol "GTE".
7. On October 31, 2023, the Filer announced that the TSX had accepted its Notice of Intention to Make a Normal Course Issuer Bid (the Current Notice) for the 12-month period commencing on November 3, 2023 and ending on November 2, 2024, to purchase up to 3,234,914 Shares, representing approximately 10% of the Filer's public float as defined in the TSX Company Manual (the Public Float) as of the date specified in the Current Notice (the Current Bid). The Current Notice specifies that purchases under the Current Bid will be made through the facilities of the TSX, the NYSE American or alternative trading platforms in Canada or the United States, if eligible, or by such other means as may be permitted by the TSX, the NYSE American and applicable securities laws.
8. Issuer bid purchases made in the normal course through the facilities of the TSX by the Filer are, and will be, conducted in reliance on the exemption from the Issuer Bid Requirements set out in section 4.8(2) of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104, and such exemption, the Designated Exchange Exemption). The Designated Exchange Exemption provides that an issuer bid made in the normal course through the facilities of a designated exchange is exempt from the Issuer Bid Requirements if the bid is made in accordance with the by-laws, rules, regulations and policies of that exchange. The TSX is a designated exchange for the purposes of the Designated Exchange Exemption.
9. The TSX's rules governing the conduct of normal course issuer bids (the TSX NCIB Rules) are set out, inter alia, in sections 628 to 629.3 of Part VI of the TSX Company Manual. The TSX NCIB Rules permit a listed issuer to acquire, over a 12-month period commencing on the date specified in the Notice of Intention to Make a Normal Course Issuer Bid (a Notice), up to the greater of (a) 10% of the Public Float as at the date specified in the Notice, or (b) 5% of such class of securities issued and outstanding as at the date specified in the Notice.
10. Other than purchases made on U.S. Markets in reliance on this decision, purchases by the Filer under issuer bids made in the normal course through U.S. Markets and alternative trading platforms in Canada are, and will be, conducted in reliance upon the exemption from the Issuer Bid Requirements set forth in section 4.8(3) of NI 62-104 (the Other Published Markets Exemption). The Other Published Markets Exemption provides that an issuer bid 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 12-month period does not exceed 5% of the securities of that class outstanding at the beginning of the 12-month period.
11. As at December 31, 2023, the Filer had purchased an aggregate of 1,041,804 Shares under the Current Bid. Of those 1,041,804 Shares, 740,762 Shares were purchased on the TSX, 243,818 Shares were purchased on alternative trading platforms located in Canada, nil Shares were purchased on the NYSE American, and 57,224 Shares were purchased on U.S. Markets other than the NYSE American.
12. For the 12-month period ended December 31, 2022, an aggregate of 245,609,676 Shares were traded over published markets in Canada and the United States, with trading volumes having occurred as follows:
(a) 38,080,003 Shares (or approximately 16% of total aggregate trading) over the facilities of the TSX;
(b) 42,367,747 Shares (or approximately 17% of total aggregate trading) over alternative trading platforms in Canada;
(c) 10,943,708 Shares (or approximately 4% of total aggregate trading) over the facilities of the NYSE American; and
(d) 154,218,218 Shares (or approximately 63% of total aggregate trading) over the U.S. Markets other than the NYSE American.
13. For the 12-month period ended December 31, 2023, an aggregate of 123,386,010 Shares were traded over published markets in Canada and the United States, with trading volumes having occurred as follows:
(a) 15,551,893 Shares (or approximately 13% of total aggregate trading) over the facilities of the TSX;
(b) 17,823,728 Shares (or approximately 14% of total aggregate trading) over alternative trading platforms in Canada;
(c) 10,072,666 Shares (or approximately 8% of total aggregate trading) over the facilities of the NYSE American; and
(d) 79,937,723 Shares (or approximately 65% of total aggregate trading) over the U.S. Markets other than the NYSE American.
14. The Filer's daily trading volume of the Shares on the U.S. Markets is greater than on the TSX for a significant majority of trading days. Compared to the TSX, trading volume of the Shares on the U.S. Markets was greater on approximately 75% of the trading days in 2022 and approximately 97% of the trading days in 2023 on which both the TSX and the NYSE American were open for trading. The Filer expects that, over the course of the Proposed Bids, the trading volume of the Shares on the U.S. Markets will continue to be significantly greater than the trading volume of the Shares on the TSX.
15. As a significant volume of Shares have historically traded through the U.S. Markets, the Filer wishes to have the ability to make repurchases under the Current Bid and any Normal Course Issuer Bid that may be implemented by the Filer following expiry of the Current Bid (collectively, with the Current Bid, the Proposed Bids) over the U.S. Markets in excess of the maximum allowable in reliance on the Other Published Markets Exemption up to the maximum aggregate share limit authorized and approved by its board of directors and permissible by the TSX.
16. Purchases in the U.S. under the Proposed Bids will be effected in accordance with all applicable securities laws, including the 1934 Act and the rules and regulations of the SEC made pursuant thereto, and any applicable by-laws, rules, regulations or policies of the U.S. Markets on which the purchases are carried out (collectively, the Applicable U.S. Rules).
17. In connection with the Proposed Bids, the Filer will rely on the "safe harbour" from liability for manipulation under the 1934 Act provided by Rule 10b-18 under the 1934 Act (Rule 10b-18) for purchases made on U.S. Markets and will conduct any such purchases in accordance with the parameters set forth therein. Pursuant to Rule 10b-18, all purchases made by or on behalf of the Filer through U.S. Markets:
(a) are required to be made through only one broker or dealer on any single day;
(b) cannot be the opening purchase of a trading session and cannot be made during the 10 minutes before the scheduled close of a trading session;
(c) cannot exceed the highest published independent bid or last reported independent transaction price on the relevant U.S. Market (whichever is higher); and
(d) cannot exceed, on any single day, an aggregate amount equal to 25% of the average daily trading volume over the U.S. Markets, calculated in accordance with Rule 10b-18 (provided one block purchase per week may be effected in compliance with the calculation in Rule 10b-18(b)(4)).
18. Purchases of Shares by the Filer of up to 10% of the Public Float on U.S. Markets are permitted under the Applicable U.S. Rules. Under the Applicable U.S. Rules, there is no aggregate limit on the number of Shares that may be purchased by the Filer through the facilities of U.S. Markets.
19. 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.
20. The Filer believes that the Proposed Bids are in the best interests of the Filer.
21. No other exemptions exist under the Legislation that would permit the Filer to continue to make purchases pursuant to the Proposed Bids through the U.S. Markets on an exempt basis once the Filer has purchased, within a 12-month period, 5% of the outstanding Shares in reliance on the Other Published Markets Exemption.
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 Applicable U.S. Rules, and are established and conducted in accordance and compliance with the Applicable U.S. Rules and in reliance on Rule 10b-18;
(b) the Notice of Intention to Make a Normal Course Issuer Bid accepted by the TSX in respect of any Proposed Bid that may be implemented by the Filer specifically contemplates that purchases under such bid will also be effected through the U.S. Markets;
(c) purchases of Shares under a Proposed Bid in reliance on this decision shall only be made:
(i) in compliance with Part 6 (Order Protection) of National Instrument 23-101 Trading Rules;
(ii) at a price which complies with the requirements of paragraph 4.8(3)(c) of NI 62-104; and
(iii) in accordance with the TSX NCIB Rules.
(d) the Exemption Sought applies only to the acquisition of Shares by the Filer completed within 36 months of the date of this decision pursuant to a Proposed Bid in effect at such time;
(e) prior to purchasing Shares under a Proposed Bid in reliance on this decision, the Filer issues and files a press release setting out the terms of the Exemption Sought and the conditions applicable thereto;
(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 on the first day of such 12 month period; and
(g) the aggregate number of Shares purchased pursuant to a Proposed Bid in reliance on this decision, the Designated Exchange Exemption and the Other Published Markets Exemption does not exceed, over the 12-month period specified in the Notice of Intention to Make a Normal Course Issuer Bid in respect of the relevant Proposed Bid, 10% of the Public Float as specified in such Notice of Intention to Make a Normal Course Issuer Bid.
"Timothy Robson"
Manager, Legal
Corporate Finance
Alberta Securities Commission