Filed under: IPO
The Directive has introduced a new “single passport for issuers”. This means that once approved by the authority in one Member State, a prospectus has to be accepted everywhere else in the EU. It is a centrepiece of the EU’s Financial Services Action Plan.
The affect on companies looking to raise funds is wide reaching as there is a requirement for companies issuing securities to the public, or on a recognised exchange, to create a prospectus that is then submitted to their host state regulator for approval.
The rules governing the creation of a prospectus for those in the UK are similar to the Public Offer of Securities Regulations that were in place prior to the Prospectus Directive coming into place. These rules, and the new ones, may seem onerous to those contemplating raising funds, however, the format is standard and can (depending on who you hire) be a simple and quick process.
There are three basic rules that you should adhere to; disclosure, disclosure, disclosure. It seems simple but the ‘POS Reg’ rules sought to stick to this as do the Prospectus Directive rules. Anything at all that could be deemed to be material to the fund raising or information an investor should know for them to make an informed decision, should be in the prospectus.
Examples would be bankruptcies of directors, contingent liabilities of the firm even previously failed business enterprises of the directors. All of the disclosures should be made to avoid problems after the fund raising is complete.
One of the most important parts of the directive for small companies is the exemptions that area available from creating a prospectus that would need to be submitted to authorities such as the FSA in the UK.
The main one being small transactions below €2.5mn. This exemption is extremely important for companies who are looking to raise pre-IPO or expansion finance when private, and is an huge increase from the previous exemption levels.
As a company we still advise corporate clients to create a prospectus that is in line with the prospectus directive and the previous POS Regs because disclosure is still an issue, however, not having to submit such a prospectus to the regulatory authorities reduces costs and makes the process more efficient and speedy.
With the cooperation of the directors of a company such a prospectus can be written and available for investors within 2 – 4 weeks. Having developed many prospectuses to this level we have the in-house expertise to help your company create a professional, investor ready, prospectus in a short space of time and at a much lower cost than most brokers or corporate finance houses.
Should your company require a regulated prospectus we are happy to work with you on the original drafting and work with you to select a suitable brokerage company that can aid you in raising funds for your operation.
Filed under: IPO
Not wishing to talk ourselves out of business here, but the question, perhaps, should be ‘Do you really want to be involved in the first place?’. We are not making any judgement on any specific deal here, but investors should look at all the factors first.
1. Modus Operandi
For years we have seen big private equity firms buy public companies out and take them private, clean them up and then sell them on for profit. Seems like a simple plan akin to buying a house and doing it up, only bigger. However a number of these firms talk about the stock market like it does not reflect value and has harmed companies, we are then expected to believe that the floatation of the very same companies saying this is sensible?
2. Top of the market.
There is no doubt in my mind that some of the people running these firms are very clever and very smooth operators who have made vast amounts of money, billions in some cases, buy low and selling high. Now that they are effectively selling their companies to the market, have they decided that this is the perfect time to sell. I.e have we seen the top?
3. Motivation
Some of the founders of the businesses that we are seeing getting listed are going to make billions of dollars. They have done this buy being involved in their business and building them up over years. These are not the kind of businesses that you can just put in a CEO and hope that all will be well. They are not selling biscuits, cigarettes or Oreos here. These business are built around deal makers who can spot and opportunity, who thrive on the deal, more importantly these are the guys that give enough confidence to lenders to invest the huge sums of money that are required to do these deals. Will these guys still be there when there are shareholders meetings, SEC enquiries and all the daily drudgery of being a listed business?
4. Regulatory issue
We have already seen the private equity guys brought before senate committees and parliamentary hearings being questioned on their businesses. They have brought up tax issues, economic concerns, labour problems etc etc. As these business continue to do deals will we see a backlash like in the junk bond markets of the 1980’s when investment bankers were put in prison and the industry effectively neutered?
5. Deal Flow
How many more multi billion dollar deals can be done? If you were a CEO of a company now, seeing your competitors being taken over and other CEO’s being ‘rationalised’ wouldn’t you be doing all you could to bring in outside consultants to look at your business and make suggestions on what a private equity firm would do if they took you over?
6. Structure
Remember also, that you would not be buying the deals that the firm are involved in, you would be buying the share of the management company and the profit flow from that. There is a difference.
The lists above is by no means exhaustive and we haven’t put any of the positives, of which there are many, but it is important to think about whether or not you want to get involved rather than whether you can or not.
