Who qualifies as a qualified institutional buyer (QIB)?
What happens if QIB is not subscribed?
If a QIB is not subscribed, the following things can happen:
1. The company may not be able to raise enough capital.
2. The company may have to offer more shares at a lower price, which can dilute the value of existing shareholders' holdings.
3. The company may have to offer shares to a wider group of investors, which can include retail investors.
4. The company may have to offer shares to strategic investors, which can give them a larger stake in the company and potentially control. Are all banks QIBs? Yes, all banks are QIBs.
Can a person be a QIB?
A Qualified Institutional Buyer (QIB) is an entity that is:
-An institutional investor that is registered with the SEC
-A bank, insurance company, registered broker-dealer, business development company, or small business investment company
-An employee benefit plan with at least $5 million in assets
-A governmental entity with investment discretion over at least $5 million
-A mutual fund with at least $5 million in assets
-An investment adviser registered with the SEC
-A venture capital fund
-A private equity fund
-A hedge fund
-A family office with at least $5 million in assets under management
-A company with at least $5 million in assets
-A natural person who has individual net worth, or joint net worth with his or her spouse, that exceeds $2 million Who can invest in QIP? A Qualified Institutional Placement (QIP) is an offer of securities by a listed company to institutional investors through the process of private placement in order to raise capital. The Securities and Exchange Board of India (SEBI) regulates QIPs in India.
In order to be eligible to invest in a QIP, an investor must be an institutional investor as defined by SEBI. SEBI regulations state that an institutional investor includes:
- insurance companies
- mutual funds
- foreign institutional investors (FII)
- venture capital funds (VCF)
- foreign venture capital investors (FVCI)
- public financial institutions (PFIs)
- alternative investment funds (AIF)
Is a QIB a QP?
A QIB is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933. A QP is a "qualified purchaser" as defined in Section 2(a)(51) of the Investment Company Act of 1940.
The definition of a QIB in Rule 144A is broader than the definition of a QP in Section 2(a)(51) of the Investment Company Act. A QIB includes, but is not limited to, a person that:
-Is a bank, insurance company, registered broker-dealer, or business development company;
-Is an employee benefit plan that is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary that is not a " disqualified person" as defined in that Act;
-Is a governmental entity or political subdivision thereof;
-Is an entity organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual;
-Is a private foundation as defined in Section 4946 of the Internal Revenue Code;
-Is a corporation, Massachusetts or similar business trust, or partnership, if:
-Each equity owner of the entity is a QIB; and
-The entity has total assets in excess of $5 million.