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Following the publication of the Prospectus, the Public Offering period begins. In less frequent cases in which a Private Placement is also being held, the Order Book is open to collect orders from the Institutional Investors.
The Offering period normally takes between 1 and 2 weeks.
4.1.1.3.1. Management roadshow
The Management roadshow refers to a series of presentations pitched by the Company’s Management together with the Financial Advisor(s) and Placement Financial Intermediary(ies) to a wide range of potential Institutional Investors, allowing them to have a closer contact with the Company and, ultimately, to lead them to participate in the Bond Offering.
Roadshow Events
Roadshow events may be important to the level of participation in a Bond Offering and may be held across different locations, at a national and/or international level, considering the investors they aim to target.
The goal is to present to investors the Company’s Management and their strategic vision, the Company’s strengths and growth perspectives, and address concerns expressed before by investors.
Topics addressed on the roadshow events are usually the following:
Traditionally roadshows are held in a format of live meetings, but in the last years it is becoming more and more common to hold part of the roadshow presentations online through online videos and podcasts. At the end of each session there is always a Q&A session where investors’ representatives have the freedom to ask general questions about the Company and the Bond Offering process.
4.1.1.3.2. Pricing
4.1.1.3.2.1. Bond valuation
When valuing bonds, the following factors need to be considered:
When offering bonds, the Company needs to decide if it wants to issue the bonds at par value (i.e. the amount that will receive from investors will be the same as the principal that needs to be paid at the maturity of the bond) or different from par value (choosing instead the coupon rate).
If the Company wants to offer bonds at par value, an appropriate coupon rate must be assessed. To do so, it is necessary to analyse the yield to maturity of similar bonds that are being traded (i.e. with similar risk).
If the Company prefers to define the interest payments (i.e. coupon rate), the price of the offered bond will be equal to the sum of the cash flows estimated (including coupons plus principal)discounted at an average rate that reflects the opportunity cost of capital.
To successfully execute the valuation of the bonds, the Company may request support from a Financial Advisor.
4.1.1.3.2.2. Price determination
The price determination for a Bond Offering follows the same rules as the price determination process for an IPO.
Recommended reading: 3.1.1.3.2.2. Price determination.
However, contrary to what happens in an IPO, the most common way to determine the price for a Bond Offering is through the fixed price method during the preparation of the Prospectus. In the fixed price method the number of available bonds and the Offer price of the bonds is known in advance. Allocation of bonds if investors demand exceeds the number of bonds being offered, is usually made on a pro-rata basis.
Although the price is fixed prior to the offering and disclosed in the Prospectus, there is the possibility to define in the Prospectus that depending on the success of the placement of the bonds, the Issuer may decide to increase the size of the Offering (i.e. the number of bonds offered) provided that CMVM approves this change.
4.1.1.3.3. Placement of the Public Offering
4.1.1.3.3.1. Investors targeted by the Offering
The offer may have as a target the general public (Public Offer) and /or Institutional Investors (by a Private Placement). Most of the offers in Portugal that require a Prospectus to be prepared are Public Offers targeting the general public, without any allocation to Institutional Investors (this does not mean that this type of investors cannot participate in the Offer, only that there is no specific segment targeting them).
4.1.1.3.3.2. Offering Period
The length of the period varies greatly from one transaction to another but usually ranges from around 1 to 2 weeks.
The offering period usually starts on the day following the publication of the Prospectus (or a few days later) and its term may be extended depending on the success regarding investors’ demand and market conditions, subject to CMVM’s authorization.
4.1.1.3.3.3. Acceptance of the Offer
Investor’s statement of acceptance of the public offering is done by an order addressed to any financial intermediary legally authorized to render the service of the reception, transmission or execution of orders on third party’s behalf. Such acceptance orders may be revoked up to five days before the end of the offer period, or within a shorter timeframe, whenever stated in the Prospectus.
4.1.1.3.3.4. Revision of the Offer
Until two days before the end of the offer period and subject to the CMVM’s authorisation, the offeror may review the terms and conditions of the offer, provided they are not less favourable, in global terms, to investors.
What are the effects of the offer revision?
4.1.1.3.3.5. Modification, revocation and Withdrawal of the Offer
In case of unexpected and substantial change of circumstances, as mentioned above, the offeror may modify or revoke the offer, subject to the CMVM’s authorisation.
Whenever the CMVM identified that the offer contains any irreversible illegality or breach of regulation, the CMVM will order the offer’s withdrawal.
The revocation and the withdrawal of the offer are published by CMVM, at the offeror’s expense, by the same means used to disclose the Prospectus.
The revocation and withdrawal of the offer determines the ineffectiveness of the offer and of the acts of acceptance prior or subsequent to the revocation or withdrawal, and whatever has been delivered must be returned.
The revocation and withdrawal of the offer determines that the Offer becomes void (being returned or unblocked the amount that had already been paid).
4.1.1.3.3.6. Offer Suspension
The CMVM will suspend the offer when any reparable illegality or violation of regulation is discovered. The defects that caused suspension need to be corrected in maximum 10 working days. Afterwards, if no correction is made, CMVM will order the offer’s withdrawal.
If the offer is suspended, the addressees of the offer may withdraw their statements until the fifth day following suspension, having the right to restitution whatever has been delivered must be returned.
4.1.1.3.4. Allocation of bonds
The bonds are allocated to (each class of) investors in accordance with the subscription orders received; in of oversubscription, allocation will be made in accordance with the criteria defined in the Prospectus. As a general rule, the allotment method should be made on a pro-rata basis, but other methods may be chosen subject to the CMVM’s approval.
4.1.1.3.5. Assessment of Results, Settlement and Listing
Prior to the end of the offering period the results of the Public Offering are assessed by a financial intermediary or by the market operator.
In case of a private placement, the issuance of bonds is subject to commercial registration, a formality necessary for the issue of the bonds, unless the admission of the bonds to trading on a regulated s market has occurred within the time limit for requesting registration.
The settlement occurs with the payment to the Company of the proceeds of the offering vs. the delivery of bonds to investors (made through the credit of their securities accounts by the Financial Intermediaries through which the subscription orders were processed).
Only after the settlement, the bonds will be effectively admitted to trading on the stock market.
