What are the necessary preparation steps you need to take?
Once all members of the IPO team have been selected, the kick-off meeting brings them together to agree on:
► Their roles and responsibilities
► The offering’s nature and structure, namely, whether it will be made through (i) a Company´s share capital increase with issuance of new shares and/or a sale of existing shares, (ii) a public offering or also a private offering to institutional investors, (ii) an offering addressed to investors resident in Portugal or also to investors in other jurisdictions, and which ones.
► Coordination of responsibilities for drafting sections of the Prospectus
► The timetable for the whole process and
► The composition of the team member’s and workflows.
Adapt corporate governance structure and internal compliance functions
How efficient, compliant and accountable is your company?
Legal form of the Company
|ICON||To be allowable for a company to have its shares listed on the stock exchange it is mandatory that it adopts the legal form of a Public Limited Company (in Portugal designated as Sociedade Anónima or “S.A.”). If the Company does not fall into this legal form, it will have to change this legal form before the IPO.|
Corporate Governance Structure
|ICON||Companies with shares admitted to trading on the stock market may adopt any of the 3 types of management and supervision structure for public limited companies. Any of the structures is admissible and on the Portuguese market there are listed companies with the various modalities.|
Further information on the specific requirements that may need to fulfil upon the offer of securities and admission to trading to a regulated market is presented upon mouse click of the above boxes.
***A – General Meetings***
|Table of the General Meeting||The General meeting table members can be shareholders or other persons, but, if the company has securities admitted to trading on a regulated market must be independent. To be independent, the member must not be associated with any specific interest group of the company or being under any circumstances likely to affect his exemption from analysis or decision. Particularly, to assure their independence, member cannot (a) hold or act on behalf of holders of a qualifying holding equal to or greater than 2% of the company’s share capital; and (b) have been re-elected for more than two terms, continuously or interspersed.|
|Shareholders’ General Meetings||If a company has shares/bonds admitted to trading in a regulated market the General Meetings are convened by the Chairman of the Table of the General Meeting, by publishing the convocation at least 21 days prior to the meeting (instead of on month for companies that are not in this situation).|
(at least one month prior to the meeting or 21 days if it is a company with shares/bonds admitted to trading in a regulated market) and/or sending a registered letter or e-mail to the shareholders (at least 21 days prior to the meeting).
The convocation for a meeting of a company with shares admitted to trading on a regulated market must contain besides the common elements the following additional elements:
► Information on the procedures for participation at the General Meeting, including the date of registration and the mention that only those who are a shareholders on that date have the right to participate and vote;
► Information on the procedure to be respected by shareholders for the exercise of the rights to include matters on the agenda, the submission of proposals for deliberation and information, including the deadlines for their exercise;
► Information on the procedure to be respected by shareholders for their representation at the meeting, mentioning the existence and place where the form of the representation document is available;
► The place and manner in which the full text of the documents and proposals for deliberation that will be presented can be obtained.
|Preparatory information of the General Meetings||If the company has shares admitted to trading on a regulated market, besides the common elements that must be provided, it also has to provide their shareholders, at the company’s headquarter and, on its website, with the following elements:|
► The convocation for the General Meeting;
► Total number of shares and voting rights on the date of disclosure of the convocation, including separate totals for each category of shares, if applicable;
► Correspondence voting (if applicable) and representation document forms;
► Other documents to be submitted to the general meeting.
|Meeting logs||Besides the common elements to be included in the meeting logs, companies with shares admitted to trading on the regulated market also need to include, in relation to each deliberation:|
► The total number of votes cast;
► The percentage of the represented share capital corresponding to the total number of votes cast;
► The number of shares corresponding to the total number of votes cast.
For this case it is mandatory to disclose the above information to the shareholders and to whom it had the right to participate and vote at the meeting in question, on the company’s website, within 15 days of the closing of the meeting.
***B – Board of directors***
|Guarantee||For the companies that have securities admitted to trading on a regulated market, the liability of each director shall be guaranteed by one of the forms accepted by law, in an amount established in the articles of association, which may not be less than €250k.|
|Remuneration||The companies that have shares admitted to trading on a regulated market, remunerate the directors in accordance with the information presented bellow on the button “Remuneration of the members of the administration and supervisory bodies“.|
***C – Audit Board***
|Composition||The supervision of companies that have securities admitted to trading on a regulated market that adopt the Traditional model is made mandatorily by an Audit Board and a Chartered Auditor (individual or firm) who is not a member of such Board.|
In companies with shares admitted to trading on a regulated market, the Audit Board must be composed by a majority of independent members.
|Guarantee||For the companies that have securities admitted to trading on a regulated market, the liability of each member of the Audit Board shall be guaranteed by one of the forms accepted by law, in an amount established in the articles of association, which may not be less than €250k.|
|Remuneration||The companies that have shares admitted to trading on a regulated market, remunerate the directors in accordance with the information presented below on the button “Remuneration of the members of the administration and supervisory bodies“.|
|Competency||For companies that are issuers of securities admitted to trading on a regulated market, the Chartered Auditor or the Audit Board must certify whether the report on corporate governance structure and practices disclosed includes the necessary elements. For more information on this subject see chapter 6. Life as a company with securities admitted to trading.|
***D – Audit Committee***
|Composition||For companies that have securities admitted to trading on a regulated market the Audit committee must include at least one member who has a university degree appropriate to the performance of his duties and knowledge of auditing or accounting and who is independent.|
In companies with shares admitted to trading on a regulated market, the majority of the members of the audit committee must be independent.
|Remuneration||The companies that have shares admitted to trading on a regulated market, remunerate the directors in accordance with the information presented bellow on the button “Remuneration of the members of the administration and supervisory bodies“.|
|Competency||For companies that are issuers of securities admitted to trading on a regulated market, the Audit committee must certify whether the report on corporate governance structure and practices disclosed includes the necessary elements. For more information on this subject see chapter 6. Life as a company with securities admitted to trading.|
***E – Executive Board of Directors***
|Guarantee||For the companies that have securities admitted to trading on a regulated market the liability of each Executive director shall be guaranteed by one of the forms accepted by law, in an amount established in the articles of association, which may not be less than €250k.|
|Remuneration||The companies that have shares admitted to trading on a regulated market, remunerate the Executive directors in accordance with the information presented bellow on the button “Remuneration of the members of the administration and supervisory bodies“.|
***F – Supervisory Board***
|Composition||In companies with shares admitted to trading on a regulated market, the Audit Board must be composed by a majority of independent members.|
|Guarantee||For the companies that have securities admitted to trading on a regulated market the liability of each Supervisory Board member need to be guaranteed by one of the forms accepted by law, in an amount established in the articles of association, which may not be less than €250k.|
|Remuneration||The companies that have shares admitted to trading on a regulated market, remunerate the members of the Supervisory Board in accordance with the information presented bellow on the button “Remuneration of the members of the administration and supervisory bodies“.|
|Competency||For companies that are issuers of securities admitted to trading on a regulated market, the Supervisory Board must certify whether the report on corporate governance structure and practices disclosed includes the necessary elements. For more information on this subject see chapter 6. Life as a company with securities admitted to trading.|
|Committees of the General and Supervisory Board||Where appropriate, the Supervisory Board should appoint, from among its members, one or more committees to exercise certain functions, namely to supervise the Executive Board of directors and to set the remuneration of the directors.|
For companies that have securities admitted to trading on a regulated market, the Supervisory Board must create a committee for financial matters, specifically dedicated to the exercise of the following functions:
► Verify that books and ledgers, accounting records and supporting documents are in order;
► Verify whether the accounting policies and valuation criteria adopted by the company lead to a correct evaluation of the assets and results;
► To issue an opinion on the management report and accounts for the financial year;
► Supervise the effectiveness of the risk management system, the internal control system and the internal audit system, if these exist;
► To receive reports of irregularities presented by shareholders, company employees or others;
► Supervising the process of preparation and disclosure of financial information;
► Proposing the appointment of the Chartered Auditor to the General Meeting;
► Supervising the audit of the company’s accounting documents;
► Supervising the independence of the Chartered Auditor, in particular with regard to the provision of additional services.
The committee for financial matters in companies issuing shares admitted to trading on a regulated market, the majority of the members of the committee for financial matters must be independent.
***H – Company Secretary***
|Appointment||Companies with shares admitted to trading on a regulated market must appoint a Company Secretary and a substitute.|
The Secretary and his substitute are appointed by the shareholders in the company’s incorporation or by the Board of directors or the Executive Board by deliberation recorded in meeting logs. The term of Company Secretary coincides with the term of the corporate bodies that have appointed him or her and may be renewed once or more times. The appointment and termination of Company Secretary, for any cause other than the lapse of time, is subject to registration.
The functions of Secretary should be exercised by a person with a university degree appropriate to the performance of the functions or a solicitor, who may not exercise them in more than seven companies.
|Competency||In addition to other functions established by the articles of association, the Secretary is responsible for:|
► To act as secretary at the meetings of the company bodies;
► To draw up the meeting logs and sign them together with the members of the respective company bodies and the Chairman of the General Meeting, when this is the case;
► To keep, store and maintain in order the meeting log books and sheets, the attendance lists, the share registration book, as well as the relevant documentation;
► To issue the legal notices convening the meetings of all the corporate bodies;
► To certify the signatures of the members of the governing bodies on the company’s documents;
► Certify that all copies or transcriptions extracted from the company books or documents filed are true, complete and up-to-date;
► Satisfy, within the scope of its competence, any requests made by shareholders exercising their right to information and provide the information requested by the members of the company bodies performing supervisory functions regarding resolutions of the Board of directors or the executive Board;
► Certify the content of the articles of association in force, as well as the identification of the members of the various company bodies and the powers they hold;
► Certify updated copies of the articles of association, of the decisions of shareholders and of the administration and of the entries in force in the company books, as well as ensuring that they are delivered or sent to the holders of shares who have requested them and who have paid the respective cost;
► Authenticate with his initials all documents submitted to the General Meeting and referred to in the respective meeting logs:
► Promote the registration of the corporate acts subject to registration.
To be independent, the members must not be associated with any specific interest group of the Company or be under any circumstances likely to affect their exemption from analysis or decision. Particularly, to assure their independence, members cannot (i) hold or act on behalf of holders of a qualifying holding equal to or greater than 2% of the Company’s share capital; and (ii) have been re-elected for more than two terms, continuously or interspersed.
Companies that have shares admitted to trading on a regulated market will also have to adapt its organizational structure and functioning to assure the existing legal requirements regarding:
***Balanced representation between women and men on the management and supervisory bodies***
The proportion each gender newly appointed to each company’s Administration and Supervisory body should not be less than 33,3%. These thresholds must be met in relation to all directors, executive and non-executive, comprising the Administration bodies.
The Company is also required to draw up an annual plan, to publish it on its website, to achieve effective equal treatment and opportunities for women and men, promoting the elimination of discrimination on the grounds of gender and fostering conciliation between personal, family and professional life. The preparation of this plan should follow the provisions of the “Guide for the implementation of equality plans for companies” and should be sent to the Commission for Citizenship and Gender Equality and the Commission for Equality in Labour and Employment.
In addition, companies must notify the Commission for Citizenship and Gender Equality of any changes to the composition of their administration and supervisory bodies within 10 days.
***Remuneration of the administration and supervisory bodies***
Companies that have shares admitted to trading on a regulated market, should remunerate the members of the administration and supervisory bodies in accordance with a remuneration policy approved under the terms of the following paragraphs. The remuneration committee or, when no such committee has been appointed, the Board of Directors, submit a proposed remuneration policy for the approval of the General Shareholders Meeting, at least every four years or whenever a material change occurs in the current remuneration policy.
The remuneration policy needs to be clear and understandable and should contribute to the Company’s business strategy, its long-term interests and sustainability. The remuneration policy should:
► Explain how it contributes to the Company’s business strategy, to its long-term interests and to its sustainability;
► Explain how the employment and remuneration conditions of the Company’s employees were taken into account when the policy was established
► Describe the different components of fixed and variable remuneration;
► Explain all bonuses and other benefits, regardless of their form, which may be granted, and indicate the respective proportion;
► Indicate the duration of the contracts or agreements with the Directors, applicable notice periods, termination clauses and payments related to termination;
► Indication of the main characteristics of the supplementary pension or early retirement schemes.
If the attribution of variable remuneration to members is predicted, the remuneration policy should also identify:
► The criteria for awarding variable remuneration, including financial and non-financial criteria in a clear and comprehensive manner, and explains how these criteria contribute to the Company’s business strategy, its long-term interests and sustainability;
► The methods to be applied in determining the extent to which the performance criteria have been fulfilled;
► The deferral periods and the possibility of the Company requesting the restitution of variable remuneration already awarded.
If the attribution of a component of remuneration based on shares is predicted, the remuneration policy should identify:
► The vesting periods;
► If applicable, the period for keeping the shares after the vesting;
► The way in which share-based remuneration contributes towards the Company’s business strategy, long-term interests and sustainability.
The remuneration policy needs to include a description of the decision-making process followed for its determination, review and application, including the measures to avoid or manage conflicts of interest and, if applicable, the role of the remuneration committee or other committees involved. Whenever the remuneration policy is revised, all relevant changes introduced are described and explained and how those changes reflect the votes and views expressed by shareholders on the remuneration policy, as well as the reports (see section XXX) issued regarding the referred policy.
Additionally, the Portuguese Securities Code requires Portuguese Issuers on the regulated market to include a report on Corporate Governance structure and practices in their Annual Accounts. The Corporate Governance Code is part of a self-regulatory approach based on the “comply or explain” principle, according to which companies are expected to follow the recommended recommendations but have the possibility to deviate from one or more of these recommendations to better suit their specific needs and specificities, provided that they set out in their Corporate Governance report, the circumstances, or reasons for this deviating practice.
Some of these rules and recommendations require companies to make choices that can or should be made explicit in their articles of association. Additionally, new processes/systems may need to be set up to follow those recommendations. [For further information on this subject please see section 6. Life as a company with securities admitted to trading].
Articles of association review
To request admission of shares to trade on the stock exchange (both regulated market and MTFs), the Company may need to revise the articles of association to accommodate adaptations to corporate governance and the removal of statutory limits on share transferability.
Additionally, the Company may need to consider other statutory changes such as:
► Provision for different categories of shares (ordinary shares and preferred shares without voting rights or shares with plural voting rights).
► Providing for rules in accordance with the best market practices, such as rules mitigating conflicts of interest or regulating transactions with related parties.
► Foreseeing rules that confer greater flexibility to the decision-making process, namely to the financing of the company, such as granting power to the management body to decide on capital increases.
Review of internal functioning and organisation
In addition, the Company should also anticipate the rules that it will have to comply after being listed in order to allocate the necessary resources and put in place the internal compliance functions, processes and systems necessary to guarantee the compliance with those rules [For further information on this subject please see section 6. Life as a company with securities admitted to trading].
Adapt financial accounts, if necessary
A listed company on a Regulated Market, such as Euronext Lisbon, is required to report financial accounts in compliance with the accounting standards accepted at European level, corresponding to IAS/IFRS or accounting standards considered equivalent to IFRS by the European Commission. The Company will therefore have to consider the requirements and costs related to adoption of these accounting standards.
A company listed on Euronext Growth and Euronext Access has the choice of reporting its accounts in accordance with IFRS, or accounting standards considered equivalent to IFRS by the European Commission, or with the accounting standards applicable in Portugal (i.e. SNC).
Negotiation agreements and appointment of financial intermediaries
At the beginning of the IPO journey the Company’s Management meets with potential IPO partners that may be appointed to support the IPO process and the Company on the life after becoming listed. Upon this process, the Company will celebrate the advisory contracts with the selected advisors to assist in the Offering.
One important partner may be the financial intermediary (i.e. financial advisor / investment bank) that will assure that the IPO will be properly managed and successfully marketed. At this stage the company will negotiate the placement agreement for the Offering. The signing of the contract will however take place at a later stage of the process, namely:
► Prior to the approval of the prospectus in case of a public offer; or
► On the day of Pricing, in case of a private placement.
A placement agreement is the contract, entered between an Issuer and a financial intermediary, or a syndicate of financial intermediaries, to regulate the terms and conditions of the distribution of securities that are the object of an offer.
Although the execution of a placement agreement is not mandatory in Public Offerings, having financial intermediaries assisting the Company in the distribution of securities in an IPO will be a key for the success of the transaction.
Please click below for further information on the type of placement agreements.
Internal decision-making process
The decision to go public and related decisions during the IPO journey require the prior approval of corporate resolutions during the Preparation phase, such as:
► Appointment of the company’s advisors
► Decision to submit the listing application
► Decision to increase the share capital (unless the IPO only comprises a sale of existing shares)
► Decision of allocation of shares to the public offering and to the private offering to institutional investors (unless the IPO only comprises the former)
► Pricing Decision
The Board of directors (or Executive Board) is generally responsible for the entire IPO process and for the approval of the corporate decisions, except the share capital increase that requires the approval of the General Meeting (unless the Board is entitled by the company’s by-laws to do so).
Engagement with the Regulator, the Stock Exchange and CSD
The applications for the prospectus approval by the Regulator (in Portugal, the CMVM), for the listing approval by the market operator (in Portugal, Euronext Lisbon) and registration of the company’s shares with the Central Securities Depository (in Portugal, Euronext Securities) should be filed with a set of legal and financial documents so that they are able to confirm that the Company complies with the applicable laws and regulations.
It is recommended that the company, and its advisors, engage with these entities in an early stage of the IPO journey for a smooth and timely approval procedure.
Before a company requests the admission to trading of its shares, it needs to take a number of preliminary steps. Firstly, a due diligence process must be performed, including close scrutiny of the Company’s financial, commercial, legal, accounting, tax and other affairs. This due diligence is conducted by the Company with the assistance of legal counsels and financial intermediaries, intervening in the placement and distribution of securities.
This process is intended to provide deep knowledge of the Company, allowing it to correct any problem or issue before the offering of its securities. This process also relates with the drawing process and publication of a Prospectus, since it ensures that relevant information about the Issuer is appropriately disclosed assuring the protection of investors given they will rely wholly on information disclosed in the Prospectus (for further information see the below section 184.108.40.206. Prospectus). Throughout the IPO process, additional due diligence sessions may be planned at each key milestone to ensure that information disclosed is up to date.
The results of this exercise will support the Company with the restructuring and strengthening of its corporate governance practices, as well as assurance of the completeness and accuracy of the information that will have to be provided and/or disclosed during the offering process.
Why should a Due Diligence be performed in the context of an IPO?
The Due Diligence process is an essential step in the preparation of an IPO, as it will bring to light the risks that may affect anyone who relies in the information contained in the Prospectus.
The purpose of conducting a Due Diligence process in the context of an IPO is to:
► Select/identify the information that must be part of the Prospectus, to give the reader an accurate view of the potential investment, without misleading or deceptive statements or omissions.
► Test the assurance and accuracy of the information that will be included in the Prospectus. As a best practice, at the time the draft Prospectus is delivered, all information included in the Prospectus should be tied to a source document that was duly analysed during the Due Diligence and signed off by the Issuer’s board, management and external advisers (legal, accounting and any others as appropriate).
► Ensure that any risks and/or contingencies that were identified in the Due Diligence process are addressed/mitigated before the Offer opens to public investors.
► Document the investigation process, so that all the information that is ultimately part of the Prospectus has been validated by means of all reasonable inquiries and there is no relevant omission from the Prospectus in relation to that matter.
If you decide to proceed with a Public Offering of an amount higher or equal to €8 million and/or you will request admission of the offered shares to a regulated market you will have to prepare and disclose to the public a Prospectus approved by the Regulator.
What is Prospectus?
|IMAGE||The Prospectus is a formal legal document, which provides to potential investors and analysts all material key information that may affect the investment decision. The Prospectus includes legal, financial (both historical and prospective financial information) and commercial information with contents adapted to the Company’s profile and specific securities.|
This document enables investors to clearly assess the Company’s patrimony, financial situation, results, and prospects. The Prospectus must be complete, understandable, and consistent. It must be published by the Issuer before an initial Public Offering approval by the Regulator.
The Prospectus may be drafted as a single document or as separate documents, dividing the required information into:
|Summary||The summary must be drawn up in a standardised format and in a concise manner, using simple language to make it easier to understand.|
The summary should contain key information regarding the risks of the Issuer and the securities that are being offered, the offer’s terms and conditions, detailed information on the admission to trading, and the reasons for the offer and the allocation of revenues.
|Registration Document||Document presenting the Issuer, its sector and business activities, including risk factors, assets and liabilities, accounting and financial information, management, and corporate governance, among others. It contains all information that will subsequently be shared with investors and analysts through the media, ensuring fair and equal diffusion to all parties.|
|Equities Note||Document prepared by the Company and its advisors, defining the main terms of the transaction and information on the securities that are object of the request for admission to trading, including the number of shares to be issued, the price range, a timetable for the subscription period, and the use of proceeds.|
What is an EU Growth Prospectus?
Considering the specificities of the different types of securities, issuers, offers and admissions, the EU Prospectus Regulation has introduced different types of Prospectus, such as the EU Growth Prospectus. This is a simplified Prospectus for certain SMEs, making it easier and cheaper for these companies to access the capital markets and decrease the administrative weight of the process. The EU Growth Prospectus may be used in case of an IPO on Euronext Lisbon, Euronext Growth or Euronext Access.
In what context can a company choose to draw up an EU Growth Prospectus?
Companies which comply with the guidelines below can opt for the simplified EU Growth Prospectus, provided that they do not have securities admitted to trading on a regulated market:
► Companies, which can be classified as SMEs, i.e. according to their last annual or consolidated accounts, they meet at least two of the following three criteria:
i) an average headcount under 250;
ii) total assets recorded in the Balance Sheet do not exceed €43m;
iii) annual net turnover does not exceed €50m.
► Issuers, other than SMEs, whose securities are traded or are to be traded on an SME growth market, provided that those issuers had an average market capitalisation of less than €500m on the basis of end-year quotes for the three calendar years prior.
► Issuers whose securities total consideration in the EU does not exceed €20m calculated over a period of 12 months, and provided that such issuers have no securities traded on an MTF and have an average number of employees during the previous financial year which does not exceed 499.
► Issuers, other than SMEs, offering shares to the public at the same time as seeking admission of those shares to trading on an SME growth market (i.e. one of the MTFs), provided that such issuers do not have shares already admitted to trading on an SME growth market and the combined value of the following two items is less than €200m:
i) the final offer price, or the maximum price;
ii) the total number of shares outstanding immediately after the share offer to the public, calculated either on the basis of the amount of shares offered to the public or, on the basis of the maximum amount of shares offered to the public.
What is EU passporting of Prospectus?
EU prospectus rules ensure that adequate and equivalent disclosure standards are in place in all EU countries so that investors can benefit from the same level of information. Under these rules, once a prospectus has been approved in one EU country, it is valid throughout the EU (single passport for the Issuers). This represents an important simplification for issuers since all the administrative procedures relating to the approval of the prospectus can be centralised with the financial markets regulator of the home country (in Portugal the CMVM), without the financial markets regulator of the host country being involved in such approval.
Regarding the language regime for prospectuses, in cases where the passporting of a prospectus is to be requested, it must be drawn up in a language accepted by the Competent authorities.
***1 – Preparation of the Document***
The occurrence of a Public Offering is preceded by the Regulator’s approval and the disclosure of an offering and listing Prospectus, encompassing complete, true, updated, clear, objective and lawful information necessary to enable the investors to make an informed judgement of:
► The characteristics of the offer, the corresponding securities and the rights thereto attached;
► The economic and financial position of the Company;
► The estimates regarding operating and financial activities and prospective financial information for the Issuer.
What information needs to be included in the Prospectus?
|Risk factors||The Prospectus must disclose all material risk factors that may affect the Issuer and its securities. These risk factors are usually identified during the Due Diligence process, that is carried out as part of the preparation of the transaction.|
|Issuer’s financial data||The Prospectus must include the Annual Accounts for the last three, or two, financial years (depending on the market chosen).|
All historical financial information must be audited and certified by a Charted Accountant. Additionally, in case there is a material change (usually a transaction), additional financial information must be disclosed, namely, on how that event affected the financial position of the Company.
|Alternative key performance indicators||Alternative key performance indicators may be provided when the items required to be disclosed do not give a clear picture of the Issuer’s performance or financial position. The Issuer shall clearly reconcile them with the financial statements, as well as explain their relevance and reliability.|
|Net working capital statement||It must include a working capital statement in which the Issuer gives its opinion on whether its net working capital is sufficient for its current needs or, if not, explains how it proposes to reverse that situation, in order to provide investors with a clear image of the Issuer’s ability to continue as a going concern.|
|Profit forecast||The Prospectus must include prospective financial information in the form of a financial performance forecast.|
|Tax information||The Prospectus must include a warning that the tax laws of the investor’s Member State and the Issuer’s Member State of incorporation may affect the income received on the securities.|
Additionally, the Prospectus shall include proper information in the case that the proposed investment originates a special tax regime, as for example in the case of investments in securities which give investors favourable tax treatment.
|Offer price||It is allowed not to mention the final offer price and/or the final number of securities offered to the public, provided that:|
► The prospectus discloses the criteria, and/or the conditions applicable in the determining the offer price and quantity of securities or, in the case of the price, the maximum price; or
► The agreement over either security purchases or subscriptions may be withdrawn for a period of no less than two working days following the filing of the final offer price and the quantity of securities on offer to the public.
As soon as the final offer price and the final number of securities offered are determined, they must be notified to the CMVM and disclosed.
The Prospectus of public offers in Portugal are generally drafted in Portuguese, although the CMVM may accept it is written in English, with a Portuguese version of the Summary.
***2 – Submission and request for approval***
It is usual for the Issuer to enter into discussions with the Regulator preceding the formal submission of the Prospectus application. In Portugal, such discussions are mainly intended to properly define the procedure with the CMVM and to adopt, with its consultation, an indicative timetable including the Prospectus approval procedure. Given the short timeframe for approval of the Prospectus by the CMVM, these discussions are extremely important, and it is agreed that informal and updated versions of the draft Prospectus shall be regularly sent to the CMVM, to enable it to give enough advance notice of its observations and information requiring adjustments. For further information please access CMVM – Negociação / Emitentes / Operações e Informações.
***3 – Regulatory review***
The CMVM conducts a thorough review to verify the adequacy of the Prospectus with the legal requirements relating to its content and form, particularly by examining the completeness, comprehensibility and consistency of the content, and to ensure that the Prospectus contains all the information needed for investors to make an informed decision.
This review period starts when a first draft of the Prospectus is filed with the Regulator. Afterwards, through Q&As and revised versions of the document, the CMVM interacts with the issuer/advisors until every issue is solved.
***4 – Approval***
The approval of the Prospectus implies that it is complete, understandable and comprises reliable information. The CMVM will ensure that all the information contained in the Prospectus meets the minimum requirements to ensure that investors are able to make informed decisions about the securities.
Once the CMVM grants final approval, a press release announces the intention to float (ITF), disclosing the offering’s timing and details to the market, which kicks off the marketing (placement) phase.
What is the timing for the Prospectus approval?
Preliminary calendars are usually agreed upon with the CMVM so that the Company has some idea of when it can expect the competent authority to ratify the Prospectus.
Nonetheless, in accordance with the Portuguese Securities Code, the Issuer must be notified of the approval of the Prospectus, its registration or its refusal shall be informed to the offeror within eight days from the receipt of any complementary information required by CMVM.
***5 – Publication***
Upon approval, the final Prospectus version, stating the date of approval, must be published simultaneously on all selected platforms (see table below with the list of acceptable platforms), so it can be made available to the public, which usually occurs two weeks prior to the IPO.
Once approved, the prospectus must be made available to the public at a reasonable time in advance of, and at the latest at the beginning of, the offer to the public or the admission to trading of the securities involved. Click on the button below to find out where the Prospectus must be published.
Where must the Prospectus be published?
The Prospectus must be made available to the public in electronic form on any of the following websites:
a) the website of the Issuer, the offeror or the person asking for admission to trading;
b) the website of the financial intermediaries placing or selling the securities, including paying agents;
c) the website of the market operator where the admission to trading is pursued;
d) the website of the Regulator who as approved the prospectus.
The Prospectus must be published on a dedicated section of the website which is easily accessible when entering the website. It must be downloadable, printable and in searchable electronic format that cannot be modified.
The Prospectus for a Public Offering for distribution remains valid for a 12-month period from the date of their approval by the CMVM, and provided the Prospectus is updated accordingly with any supplements or addenda that may be required.
Addenda and Rectifications
It may occur that in the time gap between the approval of the Prospectus and the date securities are admitted to trading (which usually coincides with the end of the offer period), an inconsistency is detected in the Prospectus. These inconsistencies may respect to:
► Detection of a significant omission, inaccuracy or mistake in the Prospectus; or
► Occurrence of a new fact, which may be relevant to the investors’ decisions.
In these cases, the Issuer/Offeror must issue a supplement to the Prospectus with the referred amendment/rectification and request approval of the document from CMVM.
Investors who accepted the offer prior to the disclosure of the addendum or amendment have the right to withdraw their acceptance within not less than two working days following the disclosure supplement, provided that the significant new factor, material mistake or material inaccuracy arose or was noted before the closing of the offer period or the delivery of the securities, whichever occurs first. That period may be extended by the Issuer or the offeror. The final date of the right of withdrawal must be stated in the supplement.
In order for a Company’s shares to be admitted to trading, a request for the listing of the shares should be submitted to the Stock Exchange, who will verify compliance with the general requirements for admission to trading.
In case of listing in Portuguese markets, to kick-off the admission to trading process, the Issuer first meets with Euronext to present the listing project and agree on a timetable regarding the admission to trading process.
The Issuer must appoint a Listing Agent (Euronext Lisbon) and a Listing Sponsor (Euronext Growth and Euronext Access) who will assist and guide the Issuer with the admission to trading and also help the Company to prepare the application form and all the documentation that must be submitted to Euronext.
With the submission of the listing application, the Issuer and Euronext Lisbon should agree on a schedule for completion of the admission process.
At the same time as the proceedings above, the Issuer needs to register its shares with the Portuguese Centralised System of Registration of Securities managed by Euronext Securities.
Upon registration, the shares are assigned an ISIN code by Euronext Securities.
Euronext will decide on the application for admission to listing within a maximum period of 30 trading days (1 month for Euronext Growth and Euronext Access) of receiving the required documentation, unless agreed otherwise by the applicant company and Euronext Lisbon. In case of acceptance of the application, the decision must remain valid for a maximum period of 60 days.
Euronext will notify the Company of its decision, issuing a first market notice with the date on which the admission to trading of securities must become effective, the respective market, and any specific conditions related to the admission. Afterwards, Euronext may issue succeeding market notices relating to the admission to trading, confirming the conditions have been fulfilled, among other aspects. In the event of a Public Offering of securities, the admission to trading shall become effective only after the conclusion of the offering period.
Marketing and Communication Planning
The Issuer’s Marketing and Communication strategy throughout the IPO process is crucial as it enables the Company to manage investor relations; generate interest and mitigate perceived uncertainty.
General considerations for Marketing and Communication in the Context of an IPO
In the context of an IPO, it is of paramount importance that the Issuer diligently defines how to present and promote the offer to potential investors. In an IPO context, Marketing strategy has a great impact in managing investor relations; generating interest, mitigating perceived uncertainty and thus driving a higher price and defend from market turbulence. It is also relevant to mention that material information provided directly or indirectly by the Issuer and addressed to institutional investors or special categories of investors, including information disseminated at meetings relating to offers of investment instruments as well as information provided to financial analysts, shall be disclosed to all investors to whom the offer is addressed.
Until the offer is made public, all the parties involved in the offer need to:
► Restrict the disclosure of offer related information to that necessary to fulfilling the offer’s objectives and correspondingly warning addressees as to the privileged nature of the information issued.
► Limit the use of undisclosed information to purposes related to the preparation of the offer.
As from the moment of the offer is made public, all the parties involved in releasing information regarding the offer need to:
► Observe and comply with the quality of information principles;
► Ensure the information provided is consistent with the prospectus;
► Clarify their relationship(s) with the issuer or their interest in the offer.
Additionally, when conducting pre-offering marketing activities, all the parties involved in the Offer need to assure the compliance with the EU Market Abuse Regulation (“MAR”) in what respects disclosure of inside information the context of a market sounding. MAR defines “inside information” as any nonpublic information of a precise nature relating, directly or indirectly, to an issuer or its securities and which, if made publicly available, is likely to significantly affect the price of the securities.
A market sounding comprises the communication of information to one or more potential investors, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction and its related conditions (e.g., potential size or pricing).
Click on the button below to find out more regarding the obligations that must be fulfilled in the context of MAR.
In a context of a Market Sounding, what are the obligations that have to be fulfilled?
A disclosing market participant must, prior to conducting a market sounding, specifically consider whether the market sounding will involve the disclosure of inside information and must make a written record of its conclusion and the reasons therefor and provide it to the CMVM upon request. This obligation must apply to each disclosure of information throughout the course of the market sounding, and so, the market participant must update the written records.
Before making the disclosure, the disclosing market participant must:
► Obtain the consent of the person receiving the market sounding to receive inside information;
► Inform the person receiving the market sounding that he is prohibited from using or attempting to use that information, by acquiring or disposing of financial instruments relating to that information;
► Inform the person receiving the market sounding that he is prohibited from using or attempting to use that information, by cancelling or amending an order which has already been placed regarding a financial instrument to which the information relates;
► Inform the person receiving the market sounding that by agreeing to receive the information he is obliged to keep the information confidential;
► The disclosing market participant must make and maintain a record of all information given to the person receiving the market sounding and must provide it to the CMVM upon request.
In the case where information that has been disclosed during a market sounding ceases to be inside information according to the evaluation of the disclosing market participant, he/she must inform the recipient accordingly, as soon as possible, and maintain a record of the information given and provide it to the CMVM upon request.
Early-look meetings with investors / pilot fishing
While the Prospectus is being drafted, a marketing strategy is designed to create investor interest and momentum. The Company and its advisors draw up a slideshow to use in meetings with investors and equity research analysts, which includes exclusively contents presented in the Prospectus but in a more appealing manner and directed to the target investors of such meetings.
The core marketing documents, such as the slideshow, the IPO website, press releases and other communication materials, may all be adjusted throughout the IPO process, up until the management roadshow, and are all carefully reviewed and subject to approval by the CMVM.
Meetings with investors
A best practice is to have an appointed communication agency setting up a training session agenda intended to prepare the Issuer’s Management for initial meetings with investors. These meetings are usually conducted by the CEO and include interventions by the CFO. The “pilot fishing” is done on a confidential basis and consists of these one-on-one confidential early-look meetings between Management and targeted investors, with the aim to introduce the Company on a preliminary basis by explaining its business model, to measure the initial market sentiment on the Company’s equity story, ask for the investors’ feedback on several matters, such as their perception of the Company, the IPO and the share price, to understand how the market will assess and value the Company, and, most importantly, to create adhesion by investors. The management team must transmit confidence and persuade investors to trust the Company.
Pilot fishing allows an early assessment of the potential success of the IPO. Based on the potential interest noticed at these meetings, which are spread out over time, the Company may adjust its IPO project, and can postpone or even exit the process without a substantial financial commitment at this stage. If the meetings generate formal commitment of acceptance of the Offer, contractual orders will appear in the Prospectus, safeguarding pre-guaranteed demand from anchor and cornerstone investors.
Meetings with Equity Research Analysts and Pre-deal investor education (PDIE)
While the Prospectus is being drafted, the Company and its advisors prepare a management presentation of the company with equity research analysts in the banking syndicate to transmit its equity story.
After this Management presentation, the analysts then draft a detailed investment research report giving their independent assessment of the company’s business, its competitive environment for comparable peers and an indicative valuation range. After some interactions with management, the analysts then offer the company a final review of their report, excluding the valuation to maintain their impartiality.
The pre-deal investor education (PDIE) is an optional phase that enables to measure market sentiment before the placement, with the assistance of equity research analysts. This phase starts with equity research analysts distributing their pre-deal research reports to key institutional investors, presenting the investment case and their valuation range.
In meetings or conference calls with investors, where Management is not present, analysts present the Company’s business model and the equity story highlights, share their opinion regarding the Company’s fundamental value or potential risks associated with investing in its share, answer their questions on the Issuer, and collect their feedback before setting price range. Following those meetings, the dialogue with investors is sustained by the financial advisor(s) to collect feedback on their interest, the share price, and the Company’s strengths and weaknesses perceived by them.
Based on that feedback, which allows the advisors to measure market sentiment, they will define, together with the Company’s Board, the share price range. The price range may be set up to +/-15% and usually includes an IPO discount to reward the risk taken by investors allocating funds to a newly listed company.