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Magnet Forensics Closes $74.4 Million Bought Deal Secondary Offering

12/14/2021

Not for distribution to U.S. news wire services or dissemination in the United States.

WATERLOO, ONDecember 14, 2021 – Magnet Forensics Inc. (“Magnet Forensics” or the “Company”) (TSX: MAGT), a developer of digital investigation software used globally by public safety organizations and enterprises, announced today that certain shareholders (collectively, the “Selling Shareholders”), including Jad Saliba, our Founder, President & Chief Technology Officer, Adam Belsher, our Chief Executive Officer, certain other members of management and In-Q-Tel, Inc., have successfully completed the previously announced bought deal offering of an aggregate of 2,456,814 subordinate voting shares (the “Offered Shares”). The subordinate voting shares were offered and sold at a price of C$30.30 per share for aggregate gross proceeds to the Selling Shareholders of approximately C$74.4 million (the “Offering”). 

Each of Jad Saliba and Adam Belsher sold their respective portions of the Offered Shares, being 900,000 subordinate voting shares, through holding companies controlled by them. In-Q-Tel, Inc., a not-for-profit strategic investor, sold all of its 431,814 subordinate voting shares and no longer holds any shares of the Company following closing of the Offering. The remaining shares were sold by holding companies controlled by other members of management. 

The underwriting syndicate consisted of Canaccord Genuity Corp.  (“Canaccord”), BMO Capital Markets (“together with Canaccord, the “Co-Lead Underwriters”), National Bank Financial Inc., RBC Capital Markets and CIBC Capital Markets (collectively, with the Co-Lead Underwriters, the “Underwriters”). The Underwriters were granted an over-allotment option in connection with the Offering (the “Over-Allotment Option”). 

Each of the Company, its directors and all of its named executive officers, including the Selling Shareholders, agreed to a lock-up period of 90 days, during which time they will be restricted from disposing of any further securities of Magnet Forensics without the prior consent of the Co-Lead Underwriters, on behalf of the Underwriters. 

The subordinate voting shares were offered in Canada by way of a prospectus supplement dated December 9, 2021 (the “Prospectus Supplement”) to its short form base shelf prospectus dated October 29, 2021 (the “Base Shelf Prospectus”) with the securities regulatory authorities in each of the provinces and territories of Canada. The Offering was made in Canada only by means of the Base Shelf Prospectus and Prospectus Supplement. Such documents contain important information about the Offering. Copies of the Base Shelf Prospectus and Prospectus Supplement are available on SEDAR at www.sedar.com.

No securities regulatory authority has either approved or disapproved the contents of this press release. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the subordinate voting shares in any province, state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such province, state or jurisdiction.

Early Warning Reports 

Unless otherwise indicated or the context otherwise requires, the references to numbers and percentages of shares of the Company beneficially owned or controlled in this press release are calculated on the basis of 31,071,825 Multiple Voting Shares and 9,616,614 Subordinate Voting Shares issued and outstanding as of December 8, 2021 as disclosed in the Company’s Prospectus Supplement and does not give effect to the potential exercise of the Over-Allotment Option.

On December 14, 2021, immediately prior to closing of the Offering, the Company shares held by Mr. Saliba and certain Saliba Group Permitted Holders (as defined in the Base Shelf Prospectus) were reorganized (the “Saliba Group Reorganization”), resulting in (i) Candestra Holdings Inc. (the “Saliba Holdco”) holding 3,612,237 multiple voting shares and 1,084,261 subordinate voting shares, 900,000 of such subordinate voting shares representing a portion of the Offered Shares, (ii) The Saliba 2014 Family Trust holding an aggregate of 7,779,568 multiple voting shares and (iii) Mr. Saliba directly holding 234,613 multiple voting shares. 

Also immediately prior to closing of the Offering, the Company shares held by Mr. Belsher and certain Belsher Group Permitted Holders (as defined in the Base Shelf Prospectus) were reorganized (the “Belsher Group Reorganization”, and together with the Saliba Group Reorganization, the “Pre-Closing Reorganizations”), resulting in (i) Fortis Investments Inc. (the “Belsher Holdco”) holding 3,681,847 multiple voting shares and 1,084,261 subordinate voting shares, 900,000 of such subordinate voting shares representing a portion of the Offered Shares, (ii) The Belsher 2014 Family Trust holding an aggregate of 7,260,271 multiple voting shares and (iii) Mr. Belsher directly holding 135,717 multiple voting shares.

Prior to the completion of the Pre-Closing Reorganizations and the closing of the Offering, Mr. Saliba directly and indirectly owned or controlled 12,710,679 multiple voting shares (representing approximately 40.9% of the issued and outstanding multiple voting shares), Mr. Belsher directly and indirectly owned or controlled 12,162,096 multiple voting shares (representing approximately 39.1% of the issued and outstanding multiple voting shares), and Mr. Jim Balsillie indirectly owned or controlled 6,199,050 multiple voting shares (representing approximately 20.0% of the issued and outstanding multiple voting shares).  

After the closing of the Offering, Mr. Saliba directly and indirectly owns or controls 184,261 subordinate voting shares, representing approximately 1.6% of the issued and outstanding subordinate voting shares and 11,626,418 multiple voting shares, representing approximately 40.2% of the issued and outstanding multiple voting shares, Mr. Belsher directly and indirectly owns 184,261 subordinate voting shares, representing approximately 1.6% of the issued and outstanding subordinate voting shares and 11,077,835 multiple voting shares, representing approximately 38.3% of the issued and outstanding multiple voting shares, and Mr. Balsillie continues to directly and indirectly own 6,199,050 multiple voting shares, representing approximately 21.4%  of the issued and outstanding multiple voting shares. 

One of the Selling Shareholders, Angelo Loberto, the Company’s Chief Financial Officer and Chief Operating Officer, prior to the completion of the Pre-Closing Reorganizations and the closing of the Offering, beneficially owned or controlled, directly or indirectly, an aggregate of 1,260,000 subordinate voting shares, representing approximately 13.1% of the issued and outstanding subordinate voting shares, of which (i) 1,010,000 were held directly by Mr. Loberto and (ii) 250,000 were held by 1000019034 Ontario Inc. (the “Loberto Holdco”), an entity wholly owned by Mr. Loberto with 150,000 of such subordinate voting shares representing Mr. Loberto's portion of the Offered Shares. Upon completion of the Offering, Mr. Loberto beneficially owns or controls, directly or indirectly, an aggregate of 1,110,000 subordinate voting shares, representing approximately 9.4% of the issued and outstanding subordinate voting Shares. 

The subordinate voting shares were disposed of in the Offering as a result of investment considerations including price, market conditions, availability of funds, evaluation of alternative investments and other factors. Messrs. Belsher, Saliba, Balsillie and Loberto, and entities controlled by each of them, respectively, may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of the Company, in such manner as they deem advisable from time to time, subject to applicable laws and the terms of the Company’s articles and of agreements to which they are party, as described in Early Warning Reports to be filed by each of them on SEDAR at www.sedar.com and available from the Company contact referred to at the end of this press release.

About Magnet Forensics

Founded in 2010, Magnet Forensics is a developer of digital investigation software that acquires, analyzes, reports on, and manages evidence from digital sources, including computers, mobile devices, IoT devices and cloud services. Magnet Forensics’ software is used by more than 4,000 public and private sector customers in over 90 countries and helps investigators fight crime, protect assets and guard national security.

For further information, please contact:

Neil Desai 

Tel: 226-243-6337

PR@magnetforensics.com 

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