What are the steps in order?
- Advisers are appointed
- Preparation of applicant and pre-marketing.
- Due diligence
- Preparation of applicant
- Preparation of listing document
- Pre-marketing to institutions
- Verification - Prospectus published
- Preparation for the hearing
- Admission hearings
- Trading of the shares
What happens during the process of “preparation of applicant and pre-marketing?”
- Due diligence
- Preparation of applicant
- Preparation of listing document
- Pre-marketing to institutions
- Verification
What happens during “preparation for hearing?”
- Marketing
- When there are retail offers - only marketing to retail investors
- Applications for listing / trading
- Supplementary prospectus
What are the steps that need to be considered when there is preparation for Listing?
- Conversion to a Public Company
- Share Capital Requirement
- Conversion Documentation
Explain the Preparation for Listing:
Working Capital
- LR 6.1.16R
- Company must satisfy FCA that group has sufficient working capital available
- For the groups future spending needs
- For at least the next 12 months from the date of publication of the prospectus
Explain the Preparation for Listing:
Articles of association
- Articles in form of Table A
- Or Model Articles for companies incorporated under CA 2006 - unlikely to be appropriate for a listed plc.
- Usually firms will have precedent set of articles which are more appropriate and will accommodate the particular requirements of a public ltd company
Pre-emption rights
- LR 2.2.4 - rights must be freely transferable
- New articles would not include pre-emption rights on transfer of shares
- Eligible for CREST - must be compatible with electronic settlement
- So the company needs to amend its articles to reflect that some company shares will be held in electronic form
• So there must be nothing inherent in the constitution of a company that prevents electronic settlement
○ Requirements are set out in Central Securities Depository CSD Regulation - Reg No 909 / 2014 of July 2014
Explain the Corporate Procedures that must be adhered to before applying to the Main Market?
- Company should ensure that it complies with the spirit of the:
• Listing Principles
• Premium Listing Principles PLPs
• Contained in Chapter 7 of the Listing Rules.
What are the 5 advantages of flotation?
- Market for shares - need market for potential sellers
- Price for shares - higher price on liquid market
- Access to capital - allows access to
- Increased profile - among investors
- Employee incentive - incentivise employees by involving them in the float
Explain the advantage of flotation 1/5: Market for shares
- Need market for those who want to sell their shares o
- Unlikely to be private buyer available in the case of some companies
- Other shareholders unlikely to be able to purchase shares
Explain the advantage of flotation 2/5: Price for shares
- Higher price likely on liquid market
- Current shareholders can also sell/buy shares more easily
Explain the advantage of flotation 3/5: access to capital
- Allows access to capital from a wider group of investors through the market
- Good for potential expansion
Explain the advantage of flotation 4/5: increased profile
- Amongst investors, customers etc.
Explain the advantage of flotation 5/5: employee incentives
- Could incentivize employees by involving them in the float or introducing share option schemes going forward
What are the 5 disadvantages of flotation?
- Cost
- Board changes
- Lack of control
- Management time
- Takeover target
Explain the disadvantage of flotation 1/5: cost of flotation?
- Could raise further finance but could cost 7-8% of the issue value in terms of advisers fees and underwriting costs
Explain the disadvantage of flotation 2/5: board changes?
- Principles of corporate governance may require the company to adopt a different board structure and different management structure
Explain the disadvantage of flotation 3/5: lack of control?
- After floatation, the majority of shares will be held by institutional investors who will require short and long-term returns on their investment
Explain the disadvantage of flotation 4/5: management time?
- Management time will be diverted from developing the business to working on the floatation
Explain the disadvantage of flotation 5/5: takeover target?
- Listed companies are vulnerable to hostile takeovers e.g. by a competitor
