On March 28th 2018 the European Securities and Markets Authority (“ESMA”) updated its Questions and Answers on Prospectuses (“Q&A”) to include one new question and answer on profit forecasts, specifically how it can be determined whether a profit forecast has been made.
ESMA firstly reiterates the definition of a profit forecast contained in Article 2(10) of the Prospectus Regulation EU 809/2004 (the “Original Prospectus Regulation”): “a form of words which expressly states or by implication indicates a figure or a minimum or maximum figure for the likely level of profits or losses for the current financial period and/or financial periods subsequent to that period, or contains data from which a calculation of such a figure for future profits or losses may be made, even if no particular figure is mentioned and the word “profit” is not used.”
ESMA breaks down the definition with reference to various terms used therein and then provides some practical examples of (i) wording that is considered to be a profit forecast, (ii) accounting data or financial indicators that may, on certain occasions, be considered as constituting a profit forecast and (iii) wording that is not considered to be a profit forecast. ESMA has also clarified that long term financial objectives or forecasts may be considered as profit forecasts depending on facts and circumstances and has pointed out that merely stating that information in a prospectus is not a profit forecast is not sufficient to remove such information from the scope of that definition. Finally, we are reminded by ESMA that profit forecasts and related assumptions must be clearly identified as such in a prospectus.
ESMA notes in its press release regarding the Q&A that although the Prospectus Regulation (EU) 2017/1129 (the “New Prospectus Regulation”) will become applicable on July 21st 2019, (at which time the Original Prospectus Regulation will be repealed), the definition of a profit forecast should be carried over to the new prospectus regime.
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