As previously presented, Euronext offer three different markets for the admission to trading: the Regulated market – Euronext Lisbon – and two MTF markets – Euronext Access and Euronext Growth. It’s worth highlighting that the admission requisites and the obligations arising from the admission to trading on the MTFs are much less burdensome when compared to the Regulated market. In particular, if you decide to proceed in a Public Offering or a Private Placement following the admission to trading on one MTF that does not require a Prospectus to be prepared, the offering process will be even simpler. A Prospectus will not be required for an offering that will be admitted in an MTF if:
► The Offer is only directed at Professional Investors;
► The Offer has total consideration in the European Union lower than € 8 000 000, calculated over a period of 12 months;
► The Offer is addressed to fewer than 150 Non-Professional Investors (“Retail Investors”);
► The Offer has a denomination per unit amounts to at least € 100 000;
► The Offer is addressed to investors who acquire securities for a total consideration of at least € 100 000 per investor.
Accordingly, this chapter was prepared to show potential Issuers that an IPO on an MTF, in particular if a Prospectus is not required, can be a simple process and may not require significant changes in the company.
Even though the company must prepare itself to become a public company, given the simpler process involved and the lower requisites and obligations that must fulfill if it chooses an MTF market the planning phase will be much simpler and will mostly focus firstly on assuring the IPO is the best option for obtaining the intended financing and, if so, assuring the company (and the intended offered shares) will generate interest from investors. Please refer to chapter 4.1.1. Planning for further information regarding the considerations of the planning phase of an IPO.
When choosing one of the MTFs for admission to trading, there are no requirements regarding:
► The time the company has been operating (i.e. companies recently operating may proceed with an IPO)
► The Board members and supervision bodies composition
► Market capitalization (i.e. small companies may be admitted to trading on MTFs)
Additionally, the free float (i.e. dispersion of shares amongst the public) requirements for MTFs are much less burdensome when compared with the regulated market which facilitates the admission to trading, as well as makes it easier to maintain higher control stakes in the company. It’s worth highlighting that if Euronext Access is chosen, no requirements at all must be fulfilled.
Despite the above, Offerors/Issuers must have into account that lower free floats will often imply lower liquidity of the shares and therefore lower investors’ interest on the securities. Accordingly, to guarantee investors’ appetite for the company’s offered shares the offer size (and correspondent free float) must be carefully chosen.
When choosing an MTF for the admission to trading, you won’t need to adapt your financial accounts to a different accounting standard. In what regards having audited accounts, MTFs are in general less onerous when compared to the regulated market.
In particular, if you choose Euronext Access you won’t need to have audited financial accounts at all to execute an IPO (and you won’t need to have audited accounts upon the operation).
Appointment of Advisors
Given a simpler process is involved for offering and request admission to trading on MTFS, the Issuer/Offeror may not require hiring a third party to instill project management into the IPO and guarantee the project management function internally. Portuguese companies have successfully been able to execute IPOs without a PMO office hired. In what regards the need to appoint other Advisors, when choosing the MTF markets the Issuer/Offeror will only be obliged to hire a Listing Sponsor which will help to navigate the IPO process and with the interactions with Euronext. If a company has internally legal and finance capabilities and no help is necessary to promote the company to investors, it may not require hiring financial advisors and/or lawyers to conduct the IPO. Advisors may be very helpful and beneficial, but depending on the company’s internal resources, their job on the IPO process, in particular in MTFs, can be successfully executed internally.
Adapt corporate governance structure and internal compliance functions
If the company has already adopted the form of a public limited company (SA), often no further changes are required given only the admission to trading on a regulated market triggers further requirements and obligations concerning the organizational structure and bodies of the company.
If the company has not adopted the form of a public limited company (SA), it will require to do it to be able to execute the IPO (see section Legal form of the Company on chapter 126.96.36.199.2. Adapt corporate governance structure and internal compliance functions for further information). When adopting this new legal form, a new organizational structure must be established. This might sound burdensome, but the Portuguese legislation provides the possibility to choose a simple structure for the administration and supervision of the company that will not entail a major change in the company or new significant hires – the “Traditional model”. In this model, the Administration body is the Board of directors. The Board of directors is composed by the number of directors fixed in the company’s articles of association. Instead of Board of directors there can be a single director if the company’s share capital does not exceed €200k. For the supervision body is possible to choose to have only a single auditor, who must be a Chartered Auditor (individual or firm), if a MTF market is chosen for the admission to trading of the shares and if the company does not exceed (during two years in a row) two of the following limits: (i) Total balance sheet: € 20m; (ii) Net turnover: €40m; iii) Average number of employees during the period: 250. Otherwise, the supervision body in this model is the Audit Board which is composed by the number of members established in the bylaws, with a minimum of three members, and at least one of these members must be a Chartered Auditor (individual or firm).
The preparation of Prospectus is usually one of the most onerous parts of the IPO process. If an MTF is chosen, the Offeror/Issuer may be able to avoid the obligation to prepare a Prospectus if the offering of shares is done (i) through a private placement or (ii) if the offering amount is lower than €8 million. In these cases, it will only be required to prepare an Information Document which is much simpler than the Prospectus (see chapter 188.8.131.52. Prospectus).
What is an Information Document?
The Information Document is significantly more concise and flexible than a Prospectus, with the aim to reach a balance between simplifying access to finance for SMEs and protecting investors, by ensuring accurate and sufficient information. The document must be written in comprehensible language with accurate, fair, clear and non-misleading content and must include the necessary information to allow investors to make their investment decisions, such as the Issuer’s assets and liabilities, financial position, profit and losses, and prospects of the Issuer and any guarantor (when applicable), the rights attaching to such securities, among other information specified in Appendix III of the Euronext Growth Rulebook and Appendix IV of the Euronext Access Rulebook.
|Language||The Information Document is accepted in English or in Portuguese and translated by a certified translator, if necessary.|
|Legal Responsible||The Issuer, its board of executives, management or supervisory bodies are liable for any damage caused by the misleading or inaccurate nature of the content on the information document and respective amendments, or by the absence of the required information defined in the Euronext Rulebook for the Growth and Access markets.|
|Approval||The Information Document is not subject to approval by the CMVM, as the Prospectus is. It is instead approved by Euronext, which is responsible for reviewing the document’s completeness, consistency and comprehensibility.|
|Publication||Euronext Growth market:|
The Issuer should make the Information Document public by posting it on its website and making it available to Euronext for posting on its website. Both publications need to be done at the latest on the day of the scheduled first admission to trading of securities, accompanied by an issued notice by Euronext. The Information Document should remain online for a period of at least five years succeeding the date of publication and should be posted online at the same time as it is published in any other media.
Euronext Access market:
An Issuer should announce that the Information Document, shall be available by issuing a press release/announcement that the Information Document shall be put on the Issuer’s website not later than two business days prior to the first trading day.
Other preparation considerations
When no Prospectus is required, the Offeror/Issuer will only have to liaise with Euronext (otherwise with would also have to liaise with CMVM for the approval of the Prospectus). Euronext encourages early engagement with companies and their advisers to discuss the application of the eligibility criteria for listing, suitability for listing and application of the listing rules. Early engagement is crucial to identify any issues early in the process which may need to be the subject of additional explanation and argument. Additionally, at the beginning of the offer process, the Issuer and Euronext shall jointly agree on a timetable for the process of admission to trading of securities. For further details see section 184.108.40.206. Listing application.
The Due Diligence phase (see chapter 220.127.116.11. Due Diligence) will in principle only be required in case there is either a formal underwriting of bonds by the arrangers or managers of the issuance or some sort of offering / roadshow to institutional investors, to give comfort to the underwriters or these investors.
The marketing efforts of the issuer are usually tied to the size of the offering and the involvement of institutional investors. A limited offer, with no prospectus, will most likely not require the issuer to prepare and get the regulator’s approval to advertising materials. Moreover, an equity offering that is not placed with institutional investors (other than, perhaps, the arranger or manager of the issuance) will also not require any roadshow.
All in all, the marketing of shares issuances without prospectuses tends to be much simpler – or even inexistent – when compared to larger offerings with a prospectus. For those situations where some efforts may apply, even if in a limited manner, See chapters 18.104.22.168. Marketing and Communication Planning and 22.214.171.124. Early-look meetings with investors / pilot fishing for further information.
Offering and placement
The Management roadshow refers to a series of sales presentations pitched by the Company’s top executives together with the Financial Advisor(s) to potential institutional investors, allowing them to have a closer contact with the Company. When proceeding with an Offering without Prospectus, this step may be skipped. Nonetheless, some Issuers (voluntarily) try to follow some of the steps of traditional IPOs, namely in terms of offering communication, seeking to generate confidence among institutional and retail investors. Accordingly, they may decide to hold a roadshow, even if it is much more limited, possibly with 1 or 2 institutional investors. For further information on this step please refer to chapter 126.96.36.199. Management roadshow.
The pricing of the offering in these offerings is established by the financial advisors during the preparation of the Information Document, contrary to what happens in a traditional IPO, where the Prospectus contains a range or indicative values, and the price is confirmed in the bookbuilding process during the offering period.
The financial Advisors together with the Issuer will define a fixed price for the securities being offered according to valuation techniques described in chapter 188.8.131.52.1. Company valuation.
Placement of the Offering
The Information Document and the offer process are not directly subject to the legal rules applicable to Public Offers, being applicable the rules established in the Information Document itself. From recent practical experience in Portugal, the information documents tend to reflect in a simplified manner some legal rules regarding the term, amendment, revogation and acceptance of the offer, a summary information on the issuer, the destination of the proceeds of the offer, as well as the risk factors of investing in the securities offered, reproducing in a very abridged manner the essential contents of a Prospectus. This approach ensures high standards of investor protection and allows investors to have access to the necessary information to make an investment decision.
Although the CMVM neither assumes any direct supervisory power over the offer nor has the authority to approve the Information Document or any amendments thereto, the Regulator plays an important practical role, particularly as the CMVM will become responsible for supervising the Issuer and the trading of securities once the offer has been completed and the securities are trading on the MTF. Therefore, in order to protect the market and potential investors, it is common that the CMVM is consulted before and during the offering process. Eventually, the Information Document may even be published on the CMVM’s website, at the issuer’s request, although there is no obligation to do so.
Allocation of shares
The allocation of shares in the Public Offering determines the number of shares allocated to (each class of) investors that have accepted the Public Offering. In accordance with the principle of fair and equal treatment of investors, the Company and/or selling shareholders will ensure, in consultation with the members of the placing/underwriting syndicate, that a balanced treatment of the different categories of investors is in place.
The Information document should contain information on how the securities will be allocated in the event of oversubscription. As a general rule, the allotment method should be made on a pro-rata basis, but other methods may be chosen.
Assessment of Results, Settlement and Listing
At the end of the offer period, the final number of shares is allocated to the Public Offering. On the following day, the results of the Public Offering are assessed, by the Company’s financial advisor or in a Euronext’s special stock exchange session.
In case the Offer includes the subscription of newly issued shares, the Company must register the share capital increase with the commercial registry office, a formality necessary for the settlement of the offer.
The settlement occurs with the payment to the company and/or selling shareholders of the proceeds of the offering vs. the delivery of shares to the investors (made through the credit of their securities accounts by the financial intermediaries through which the subscription/acquisition orders were processed).
The shares will only be effectively admitted to trading on the stock market following the settlement of transaction.