The Float Guide How to float a company on the Vienna Stock Exchange Contact: Florian Khol Austria khol@bindergroesswang.at Yulia Kals Austria kals@bindergroesswang.at
INTRODUCTION his guide gives an overview T of what is involved in listing an Austrian company on the Vienna Stock Exchange ( Wiener Börse AG or VSE). It is a practical manual covering all aspects of a float from prerequisites through to life after the float.
CONTENTS EXECUTIVE SUMMARY... 2 1. PREREQUISITES TO FLOATING... 4 2. FLOAT TEAM... 7 3. GETTING THE COMPANY READY... 9 4. THE PROSPECTUS... 12 5. DUE DILIGENCE... 16 6. PRICING... 18 7. MARKETING THE FLOAT... 19 8. DEALING WITH THE REGULATORS... 20 9. OFFER PERIOD... 22 10. LIFE AFTER THE FLOAT... 23 CONCLUSION... 25 1
EXECUTIVE SUMMARY Why float? Floating a company allows: the company itself to raise new capital with relative ease; and existing shareholders to sell and trade their holdings in the market. Does my company qualify? Only companies having the legal form of a stock corporation ( Aktiengesellschaft or AG) or a European stock corporation ( Societas Europaea or SE) can be floated. Before a company can be floated on the Vienna Stock Exchange (VSE) it must satisfy VSE requirements relating to the value and free float of shares as well as the period of existence and financial statements of the company. It must also ensure that its structure and constitution are consistent with the listing rules of the VSE. Further it must check its readiness on the basis of several general economic criteria as to the company s development, its management structure and corporate communication. What will it cost? Usually the total costs of floating the company amount to four to eight per cent of the gross proceeds. How long will it take? An average float usually takes about five to six months. Who is on the float team? Before starting the float process, the company will need to assemble its float team. A key factor for the success of an IPO is the selection of a professional team of advisors. The float team may include a financial adviser who may act as underwriter, accountants and auditors, lawyers, notaries public and others including public relations consultants and other consultants. What goes in the prospectus? The company will need to draw-up/publish a prospectus before it can be floated. A prospectus must contain all the information that is needed in order to enable investors to make an informed assessment of the financial situation of the issuer, in particular on its assets and liabilities, profit and losses, prospects of the company and rights attaching to the securities to be offered. In particular, the prospectus for issuance of shares must contain minimum information provided for in the EU Prospectus Regulation. What is due diligence? Due diligence includes a thorough analysis of the company from the legal, financial and organisational point of view. As a result the company gets information about its own strengths and weaknesses and is able to evaluate the plausibility of its planning documentation. There are different types of due diligence (commercial, financial, legal etc). 2
Due to the complexity of issues involved in the due diligence examination, it is usually conducted by external consultants specialising in IPOs such as auditors, lawyers and investment banks as well as other specialists, if necessary. Each consultant is assigned responsibility for a certain area in the due diligence. Pricing of the float? There are a number of possible methods of issue of the shares offered under the float. The company may make either a fixed price offer or, in large floats, an open price offer of its shares. How will the float be marketed? The process of marketing the float begins with marketing to institutions. Once the prospectus is approved and published, brokers will commence marketing to their private clients and marketing to retail investors generally begins. What else is involved? The company will need to liaise with the VSE and FMA during the float process to make sure that it satisfies their requirements. The requisite applications should be identified early on so that any potential delays are avoided. Will existing shareholders be able to sell? Existing shareholders will be able to sell both at the time of the IPO and thereafter. 3
1. PREREQUISITES TO FLOATING Before a company can be floated on the Vienna Stock Exchange (VSE) it must satisfy VSE requirements relating to the value and free float of shares as well as the period of existence and financial statements of the company. It must also ensure that its structure and constitution are consistent with the listing rules of the VSE. Generally, a company seeking listing must prepare and issue a prospectus relating to the shares in the company being offered. The timing of the float is also important to its success. 1.1. Legal requirements 1.1.1. Stock corporation In order to be listed on a stock exchange the company must be organised in a form of a stock corporation or a European stock corporation. Most of the listed companies are stock corporations. In case the company is not a stock corporation/european stock corporation it must be reorganised. Shareholders meeting approving the reorganisation into a stock corporation/european stock corporation must also define the name of the company, appoint members of the managing and supervisory board and adopt articles of incorporation of the company. 1.1.2. Resolution on floating The decision to float the company must be approved by existing shareholders on a shareholders meeting. 1.1.3. International accounting standards To be listed on a stock exchange (on a regulated market) a company must have audited (consolidated) financial statements for the three preceding full business years (drawn up in accordance with International Accounting Standards (IFRS/IAS) 1.2. Requirements for admission to listing on the Vienna Stock Exchange (stock exchange requirements) To be traded on the Vienna Stock Exchange the shares must be admitted to listing on one of the VSE markets: the Official Market, the Second Regulated Market (both called regulated markets ) or the Third Market. 1.2.1. Criteria for admission to listing on a regulated market The admission to listing on the Official Market and the Second Regulated Market is governed by the Austrian Stock Exchange Act ( Börsegesetz or ASEA). The Official Market and the Second Regulated Market differ mainly as regards to admission criteria. 4
Regulated Markets Total nominal value of shares Official Market At least 2.9m (or at least 1m of nonvoting preferred shares if ordinary shares of the company are not admitted on the Official Market) Second Regulated Market At least 725,000 Free float nominal value At least 725,000 (par value shares) At least 181,250 Free float in number of shares Period of existence of the company At least 10,000 no-par-value shares At least three years At least 2,500 no-par-value shares At least one year Financial statements For three preceding full business years For the preceding full business year Prospectus Yes Yes Transferable securities for the purpose of market efficiency financial instruments to be admitted to listing must be freely transferable. Transferable securities are considered freely negotiable if they can be traded between the parties of a transaction and subsequently transferred without restriction, and if all securities within the same class as the security in question are fungible. Transferable securities which are subject to a restriction on transfer shall not be considered as freely negotiable unless that restriction is not likely to disturb the market. 1.2.2. Criteria for admission to trading on the Third Market In addition to the possibility of admission to listing on the Official Market or Second Regulated Market, shares may also be admitted to trading on the Third Market operated as the Multilateral Trading System (MTF). The admission of shares to trading on the Third Market is regulated by separate General Terms and Conditions of Business of VSE ( Rules for the Operation of the Third Market ). Neither the requirements for admission to a regulated market under the ASEA nor other provisions of the ASEA regarding financial instruments admitted to trading on a regulated market, in particular, the obligations imposed on issuers, apply to financial instruments traded on the Third Market. However the ASEA provisions on market abuse (the ban of insider dealings and market manipulation) apply also on the Third Market. Requirements for admission to trading on the Third Market: the legal status of the issuer and the issuance of the financial instruments comply with the laws of the country in which the issuer has its registered office or in which the financial instruments have been issued, and the issuer meets the prospectus requirements according to the national or EU law; in case of private placements: description of the company, financial statements or an annual report; and in case of a public offering: prospectus pursuant to the Capital Market Act ( Kapitalmarktgesetz ). 5
1.3. Prospectus For public offering or admission of financial instruments to trading on VSE the company must prepare and publish a prospectus. Prior to being published the prospectus has to be approved by the FMA. The main purpose of a prospectus is to demonstrate the company s readiness for listing and inform potential investors about the company. There are several exemptions from the obligation to draw-up/publish a prospectus, for example, if the application for admission to listing is made for: shares that over a period of 12 months represent less than ten per cent of the shares of the same category which have already been admitted to listing on the same regulated market; shares issued in exchange for shares of the same category already listed on the same market, as long as this share issue is not related to any capital increase by the issuer; securities offered within the scope of a takeover as an offer to exchange shares; securities offered or allotted within the scope of a merger as an offer to exchange shares, or which are planned to be allotted; or securities already admitted to trading on another regulated market under certain conditions. Some exemptions only apply as long as a document has been published containing information that is accepted by the FMA to be equivalent to the information contained in a prospectus. 1.4. Costs of floating The expenses of initial public offering are made up primarily of the costs of reorganising the company into a stock corporation/european stock corporation, the costs of a capital increase, the fees for allocation of the shares and the costs of financial communication activities. The largest expense is the commission charged by the bank acting as an underwriter for allocation of the shares. Usually the total costs of floating the company amount to four to eight per cent of the gross proceeds. 1.5. Timing An average good organised float usually takes at least five to six months. More complex floats might take longer especially if the company must be restructured to be ready for a floating and depending on the type of transactions involved, scope of marketing activities, the current situation on the stock exchange and the commitment of the shareholders and of the management. Although the float is usually prepared by a large team of external consultants, within the process several decisions need to be taken by the management and owners. Thus, the management and the owners must be prepared to allocate sufficient working time for the float, especially in the weeks prior to the approval of the prospectus and during the offer period for the marketing. 6
2. FLOAT TEAM Before starting the float process, the company will need to assemble its float team. A key factor for the success of an IPO is the selection of a professional team of advisors. The float team may include a financial adviser who may act as underwriter, accountants and auditors, lawyers, notaries public and others including public relations consultants and other consultants. 2.1. Accountants/auditors Generally a prospectus must include audited historical financial information for the last three years as well as the audited report in respect of each year. Accountants/auditors: assist the company in accounting; advise on financial and tax aspects of the IPO and in connection with the reorganisation of the company into a stock corporation as well as generally on financial and tax issues; conduct the financial and tax due diligence on the company; and advise the company on profit forecasts and estimates contained in the prospectus and prepare a report on profit forecasts and estimates; Investment banks may appoint their own auditors to examine the documents of the potential issuer as to their plausibility. Usually a separate due diligence is also conducted in such cases. 2.2. Lawyers Lawyers usually: advise on legal issues generally in relation to the prospectus, conduct the legal examination of the prospectus; advise on legal issues in connection with the reorganisation of the company; conduct the legal due diligence on the company; generally prepare most of the additional information section of the prospectus, as well as section material contracts ; and register the capital increase with the Companies Register. The lawyers will also generally be involved in drafting and negotiating the underwriting agreement with the underwriter and drafting the other documents required for the float, including the new constitution for the company, any employee share ownership plan and any service contracts required with key employees. 2.3. Financial marketing consultants/pr consultants A company may also engage a public relations consultant to assist the company in publicising and marketing the float. This is particularly the case in large or potentially controversial floats. The role of the public relations consultant is to ensure the company gets appropriate press coverage and to liaise with members of the media. 7
PR consultants are usually responsible for: organisation of press conferences, presentations of the company, experts meetings, road-shows, etc; preparation of documentation for press communication and advertisement campaigns; design of publications and financial reports; and advice on investor relations issues. 2.4. Investment bank/lead manager The main tasks of an investment bank (lead manager) are: preparation of a time plan and organisation of the IPO; preparation of the company s analysis and assessment; forming a bank syndicate for allocation of the shares; book-building, underwriting guarantee; structuring the issue; advice on pricing; coordination of shares allocation; and support after admission to trading on the stock exchange. The tasks of the lead manager usually also include: conducting of commercial and management due diligence and preparation of the risk analysis, support of the issuer in preparation of a listing prospectus as well as in organisation of investor meetings, advice of the issuer on selection of the exchange market and market segment and other tasks. 8
3. GETTING THE COMPANY READY In addition to complying with the float prerequisites, the company will need to review its structure and corporate governance procedures as well as take other preparatory steps before floating. 3.1. Structure (stock corporation) In case the company is not a stock corporation it must be reorganised. Shareholders meeting approving the reorganisation into a stock corporation must also define the name of the company, appoint members of the management and supervisory board and adopt articles of incorporation of the company. The share capital must amount to at least 70,000. The articles must at least contain the provisions regarding: the name and registered office; the object of the business; the amount of the share capital and whether bearer shares or name shares are issued; whether the share capital is divided into par value shares or no-par value shares, the nominal amount (par value shares) or the number of shares (for no-par value shares), the classes of shares if any; the composition of the management board; and the form of publications of the company. 3.2. Corporate governance There is no general obligation for a listed company to comply with any corporate governance requirements. However the company may voluntarily commit itself to adhere to the Austrian Corporate Governance Code (last updated in December 2011) covering the standards of good corporate management common in international business practice as well as the most important provisions of Austrian corporation law that are of relevance in this context. If the company decides to adhere to the Austrian Corporate Governance Code the company will need to put in place appropriate corporate governance procedures. A declaration of commitment to the Austrian Corporate Governance Code is mandatory for Austrian companies that want to be admitted to the Prime Market of the Vienna Stock Exchange. 3.3. Beauty Contest/selection of an investment bank The next step is the selection of the underwriting bank, which is usually done after a so-called beauty contest at which banks and underwriters present their proposals for the IPO of the company. One of the main criteria for selection of an investment bank is the bank s experience in public offerings on the relevant market as well as in a specific sector as such experience is useful for preparing an investment story and defining realistic company value. After choosing the investment bank on the beauty contest, the rest of the team is set up consisting of lawyers, auditors, other advisors and PR/IR communication agencies. For details as to the float team see Section 2. 3.4. Kick-off meeting On the kick-off meeting the issuer and all involved consultants meet for the first time in order to arrange tasks and responsibilities and to agree on the detailed time-plan. 9
3.5. Issuance concept and strategy The issuance concept and strategy are the key criteria of any public offering. The issuance concept involves the following steps: project planning and timing; issuance volume/origin of the stocks (capital increase, ownership by existing shareholders (so called reallocation ) or a combination of these two measures); admission to a certain market and a market segment; and placement and allocation strategies. Prior to float the company must also disclose the information on how the funds obtained as a result of the float will be used. The company must implement this concept for example acquisitions, internalisation strategy, development of the production capacity of the company etc as soon as possible after the float. 3.6. Categories of shares The company must decide which category of shares will be issued and which rights these shares will have. Ordinary shares have all usual rights (voting rights, participation in profit distribution, etc); preference shares are preferred as to the distribution of profit but may be limited in voting rights. There are some restrictions as to the admission of the shares to trading depending on the market segment. Preference shares cannot be admitted to trading on the prime market and on the mid market of the Vienna Stock Exchange. See also Attachment 1. There are also bearer notes and name shares (shares registered in the name of a certain holder). Since shares subject to admission to trading on the Vienna Stock Exchange must be transferrable, only bearer notes and name shares endorsed in blank can be listed. Name shares cannot be admitted to trading if their transferability is restricted (eg, bound to the approval of the company). The company can also choose between par value shares and no-par value shares. The company may not have both types of shares at the same time. Par value shares must be denominated in a value of at least one euro or a multiple thereof. No-par value shares have no nominal amount. Usually, listed companies issued bearer notes with no par value since this provides the most flexibility for share transfers and capital increases. 3.7. First contact with Vienna Stock Exchange After preparing a general concept for the initial public offering, the next step is to make an appointment for a personal meeting with VSE. The company presents its plans and the stock exchange presents the opportunities it offers for the company achieving a successful IPO. 3.8. Due diligence Due diligence is conducted together with an underwriting bank and represents an examination of the company from the legal, financial and organisational point of view. For details see Section 5. 3.9. Prospectus The listing prospectus is drafted jointly by the advisers of the issuer and external consultants, if any, in conjunction with the underwriters and their advisors. The content of the prospectus is described in Section 4. 10
3.10. Employee Share Ownership Plan Stock Options Programs Unlike in other countries, employee share ownership plans for the company s employees are not common in Austria. However, an alternate structure for such plans is to issue options over unissued shares to employees. The options are usually issued for free but have an exercise price which is payable when they are exercised. The exercise price is usually set at the share price on the date the option is issued. Generally, such options are granted to executive and general employees of a certain career level. They are a common component of mid-term to long-term incentive programs for the management. Design of appropriate offer terms is critical to meet legal requirements, corporate governance and investor expectations. 11
4. THE PROSPECTUS For public offering or admission of financial instruments to trading on VSE the company must prepare and publish a prospectus. Prior to being published the prospectus has to be approved by the FMA. The prospectus must contain all the information that is needed in order to enable investors to make an informed assessment of the financial situation of the issuer, in particular on its assets and liabilities, profit and losses, prospects of the company and rights attaching to the securities to be offered. 4.1. Prospectus requirements 4.1.1. Prospectus content The prospectus must contain information concerning the issuer and the securities to be offered to the public or to be admitted to trading on a regulated market. A prospectus has to contain information stipulated by Prospectus Regulation (Commission Regulation (EC) No 809/2004 of 29 April 2004) and described in a certain Annex to the Prospectus Regulation depending on the type of the issuer and securities involved. In particular, the prospectus for issuance of shares must contain the following minimum information: risk factors associated with the shares to be offered/admitted to trading; risk factors associated with the issuer; information on persons who are responsible for the prospectus as well as on auditors of the financial statements; general information on the issuer and the capital of the issuer; information on the business of the issuer; information on the assets, financial and earnings situation of the issuer; information on the administration, management and supervision of the company; Information on recent business developments and the business prospects of the issuer; information on the shares and their admission to a specific market; and other information. Minimum information even if the prospectus contains all the information items required in Prospectus Regulation and the relevant Annex it might sometimes be insufficient for an investor to make an informed assessment of the financial situation of the issuer. Therefore the information items required in the Prospectus Regulation represent only minimum information to be included in the prospectus. FMA may request that the information provided by the issuer be amended for each of the information items, on a case by case basis. 12
4.1.2. Summary As a general rule, each prospectus should contain a summary. The summary must convey in a brief manner and a non-technical language the essential characteristics and risks associated with the issuer, any guarantor and the securities, in the language in which the prospectus was initially drawn up and contain up to 2,500 words. The summary must be prepared and published in German or English. 4.1.3. Language The prospectus for public offers in Austria or admission to trading on an Austrian stock exchange must be prepared and published in German or English. It is admissible to draw up some parts of the prospectus in both languages (German and English). The use of both languages is only allowed if the comprehensibility of the prospectus is not affected. 4.1.4. Profit forecasts and estimates If an issuer chooses to include a profit forecast or a profit estimate the prospectus must contain the following information: a statement setting out the principal assumptions upon which the issuer has based its forecast or estimate; a report prepared by independent accountants or auditors stating that in their opinion the forecast or estimate has been properly compiled on the basis stated and that the basis of accounting used for the profit forecast or estimate is consistent with the accounting policies of the issuer; the profit forecast or estimate must be prepared on a basis comparable with the historical financial information (financial statements); and if a profit forecast in a prospectus has been published which is still outstanding, then provide a statement setting out whether or not that forecast is still correct as at the time of the registration document, and an explanation of why such forecast is no longer valid if that is the case. 4.1.5. Approval Prior to being published the prospectus has to be approved by the FMA. The process of approval takes usually two to three months from the filing of the first (incomplete) draft until the final (approval) version. The company must lodge the approved prospectus with the Notification Office of the Oesterreichische Kontrollbank AG (OeKB) as soon as possible, at the latest on the day of the publication of the prospectus. See also Section 8. 4.1.6. Publication Once approved, the prospectus must be published as soon as is practical, but in any case not later than one working day prior to the beginning of the public offer or one bank working day prior to the admission of the securities to trading. Besides, in the case of an IPO of a class of shares not already admitted to trading on a regulated market and to be admitted to trading for the first time, the prospectus must be published at least six working days prior to the end of the offer. 4.1.7. Supplements Every significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities must be 13
mentioned in a supplement to the prospectus if it occurs in the period between the approval of the prospectus and the final closing of the offer to the public or the beginning of the trading on a regulated market. The supplement must be immediately published and lodged (with OeKB) with at least the same arrangements as were applied when the original prospectus was published and lodged. At the same time the supplement must be submitted to the FMA for approval. Investors who have already agreed to purchase or subscribe to the securities before the occurrence of an event, incorrectness or inaccuracy but prior to the publication of the relevant supplement have the right to withdraw their acceptance, exercisable within a period of two working days (or seven working days if they are consumers) after the publication of the supplement. 4.2. Liability for the content of the prospectus The Corporate Markets Act provides for special joint and several liability of persons responsible for correctness and completeness of the prospectus. These persons are the issuer, the Vienna Stock Exchange (liable for incorrect or incomplete information included in its statement, see Section 8.2), auditors of financial statements (if they knew that the information in the prospectus was incorrect or incomplete and knew that the financial statements confirmed by them were to be included in the prospectus), persons who accept the investors contract statements and brokers (provided that these persons sell securities on a professional basis and that they knew or due to gross negligence did not know that the information is incorrect or incomplete) and other persons as stipulated in the Corporate Markets Act. Investors are entitled to claim damages arising out of reliance upon the correctness or completeness of the information contained in the prospectus or supplement to the prospectus that is relevant for assessing securities. Thus an investor is entitled to the claim if the investor s decision to subscribe for offered securities was based on incorrect, incomplete or misleading information of the prospectus. In particular, the incorrect assessment of the company s capital assets, non-disclosure of the material owners of the company or of a material syndicate agreement, or presentation of excessive income prospects based on an incomprehensible calculation can constitute a prospectus inaccuracy leading to liability. Compensation for damages may not be derived from the fact that securities or investments were not acquired due to incorrect or incomplete information contained in the prospectus. If the damaging action was done unintentionally, the amount of the liability towards each individual investor is limited to the purchasing price paid plus fees and interest as of the date of purchase. Liability arising out of violations of other legal provisions (eg, under the Austrian Stock Corporations Act or the Austrian Act against the unfair competition) or out of the breach of contractual obligations remain unaffected by the liability under CMA. 4.3. Criminal liability Anyone who in connection with a public offering of securities, which is subject to the obligation to publish a prospectus, offers securities for which no approved prospectus or supplement to the prospectus has been published in a timely manner; or gives incorrect advantageous information on substantial circumstances or conceals adverse facts in a published prospectus or a published supplement with respect to the facts material for the decision to acquire shares; is punishable by a prison sentence of up to two years or by a fine of up to 360 times the daily fine rate as set by the court. 14
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5. DUE DILIGENCE Due diligence includes a thorough analysis of the company from the legal, financial and organisational point of view. As a result the company gets information about its own strengths and weaknesses and is able to evaluate the plausibility of its planning documentation. The results of the due diligence influence the content of the prospectus as well as the representations and warranties section of the underwriting agreement 5.1. General Due to the complexity of issues involved in the due diligence examination, it is usually conducted by external consultants specialising in IPOs such as auditors, lawyers and investment banks as well as other specialists, if necessary. Each consultant is assigned responsibility for a certain area in the due diligence. For the purpose of examination of documents relevant for due diligence a special data room is usually made available for the due diligence team. The prospectus is prepared simultaneously with the due diligence investigations and is amended to reflect the findings of the reports and further investigations. On the end of the due diligence consultants confirm accuracy and completeness of the documents examined by them and provide the company/investment bank with confirmations, such as legal opinion (issued by lawyers) and comfort letter (issued by auditors). 5.2. Why is due diligence necessary? One of the reasons for due diligence is to ensure that the prospectus contains all the information that is needed in order to enable investors to make an informed assessment of the financial situation of the company, in particular on its assets and liabilities, profit and losses, prospects of the company and rights attaching to the securities to be offered. An investor is entitled to claim damages if the investor s decision to subscribe for offered securities was based on incorrect, incomplete or misleading information of the prospectus. There is also criminal liability for incorrect information included in the prospectus as described in Section 4.3. The persons responsible for conducting the due diligence and preparation of a prospectus such as the issuer, the investment bank, lawyers, auditors etc, are liable for the accuracy and completeness of the published information in the areas examined by them, such liability covering the absence of incorrect, incomplete and misleading information in the relevant documentation. 5.3. Types of due diligence Types of due diligence: commercial due diligence; financial due diligence; legal due diligence; human resources due diligence; environmental due diligence; and technical due diligence. 16
The commercial due diligence includes an analysis and assessment of individual fields of business, market position, development strategies and organisation, management, planning and reporting system of the company. The financial due diligence examines the present financial and profit situation of the company and analyses risk management and planning of the company. Its aim is to show risks which could influence the future financial and profit situation of the company. The legal due diligence includes an examination of the company s major contracts, liabilities, patents and other legal facts. The aim of the legal due diligence is generally to find out whether the company complies with relevant legal requirements and material contractual obligations. It is necessary to show risks resulting from any missing licences (eg, under the trade, copyright or patent law), contractual relations or any breach of legal provisions. The tax due diligence examines possible tax risks and provides an indication for tax optimisation of the transaction structure and implementation. The human resources due diligence includes analysis of possible risks or hidden burdens resulting from special obligations towards the employees and the management of the company as well as identification of the key personnel. The environmental due diligence includes analysis of possible environmental risks and any potential future burdens resulting from that risks. 5.4. Scope of the due diligence The due diligence should always cover all aspects which are to be described in the prospectus and which are, or could be, important or crucial for the company. 5.5. Performing the due diligence The due diligence is usually performed by examination of relevant documents made available by the company in a physical or electronic special data room. In addition, the float team can interview the management, key personnel or consultants of the company and conduct site visits. As the prospectus is prepared simultaneously with the due diligence, it has to be continuously amended to reflect the findings of the reports and further investigations. The due diligence ends on the day of approval of the prospectus. 17
6. PRICING The underwriter/investment bank will generally agree on appropriate offer price with the company. There are a number of possible methods of issue of the shares offered under the float. The company may make either a fixed price offer or, in large floats, an open price offer of its shares. 6.1. Pricing method Which method should be chosen depends especially on the type of investors. The most common approach for smaller offers to private investors is the fixed price offer. In case of an offer to institutional investors the book-building method is usually chosen. 6.2. Fixed price offer A fixed price is agreed between the company and an investment bank (underwriter). The price must be published in the prospectus. Fixed price offers are usually underwritten. Thus the advantage of this type of the offer price is that the company gets the fixed cash inflow. 6.3. Book-build The book-build method is usually chosen in order to achieve an issuance price and volume in line with market conditions. It is more common for larger floats for a book-building process to be used instead of a traditional underwriting. During the book-building process investors get the chance, prior to the actual pricing and allocation of the shares, to place their price/amount indications. The final pricing and allocation to investors is conducted on the basis of an order book in which the demand of all investors is recorded. 18
7. MARKETING THE FLOAT The right approach to marketing the float is critical to its success. Generally, the marketing strategy is dealt with by the investment bank, but in some floats it might be appropriate to involve marketing consultants. The Capital Market Act provides for restrictions on advertising. There are some restrictions on advertising stipulated by the Capital Market Act. Every type of advertising that refers to a public offering of shares or admission to trading on a regulated market must comply with the following principles (applicable if the company is subject to the obligation to publish a prospectus): advertising must indicate that a prospectus has been published or will be published, and where the said prospectus is available to investors; advertisements must be clearly recognisable as such. The information contained in an advertisement must not be inaccurate or misleading. This information must also be consistent with the information contained in the prospectus; and all information concerning the offer to the public or the admission to trading on a regulated market disclosed in an oral or written form, even if not for advertising purposes, must be consistent with that contained in the prospectus. When no prospectus is required, material information provided by the company to qualified investors or special categories of investors, shall be disclosed to all qualified investors or special categories of investors to whom the offer is exclusively addressed. 19
8. DEALING WITH THE REGULATORS The company will need to liaise with the VSE and FMA during the float process to make sure that it satisfies their requirements. The requisite applications should be identified early on so that any potential delays are avoided. 8.1. Vienna Stock Exchange 8.1.1. During the process The company will need to liaise regularly with the VSE during the float process to make sure that it is aware of the progress of the float and to ensure that the VSE is able to comply with the timing requirements of the company. 8.1.2. Application for admission to a regulated market on the VSE The admission application must be submitted in writing by the company and must be co-signed by an exchange member (usually an issuing bank). The company must attach to the application the current excerpt from the companies register, the current articles of incorporation of the company, the company s compliance guidelines and an approved or notified prospectus in two counterparts and other documents as stipulated in the ASEA. VSE decides on the admission to the Official Market or Second Regulated Market by issuing an official notice. After allocation of the shares to the Official Market and Second Regulated Market pursuant to the Stock Exchange Act or to the Third Market (MTF) pursuant to the General Terms and Conditions of Business of the VSE, the shares are included in the market segments. The criteria used for the allocation include transparency and disclosure requirements as well as type of financial instrument, type of market making (specialists, market makers, liquidity provided in auction trading) and the different trading systems (Xetra, Eurex ) or trading procedures (continuous trading, one-time intraday auction). For more detailed information regarding key requirements and ongoing obligations existing on different market segments please see Attachment 1 of this float guide. 8.1.3. Application for admission to the Third Market on the VSE The VSE management board decides on admission to the Third Market on the basis of a written application signed by an exchange member. The application must be accompanied by a current excerpt from the companies register, the current articles of association of the company and in case of a public offering an approved prospectus pursuant to the Capital Market Act and other documents as stipulated in the Rules for the Operation of the Third Market. 8.2. Prospectus approval by the FMA If Austria is the home Member State of the issuer a prospectus must be approved by the Austrian Financial Market Authority (FMA). If a prospectus was approved by a foreign authority the FMA must be notified of the approval of the prospectus. In this case the confirmation on notification issued by the FMA must be attached to the admission application in addition to the prospectus. When approving prospectus applications for securities that are to be admitted to trading on VSE, the FMA has the right to obtain a statement of the VSE prior to the approval, unless such a statement has already been attached to the approval application (it is usual practice for issuers to obtain a statement of the VSE prior to submission of the prospectus to the FMA for approval). 20
The FMA approves a prospectus submitted for approval if it is complete, coherent and comprehensible and complies with other conditions under Capital Market Act. The FMA neither examines the accuracy of the information included in the prospectus nor does it assess the financial situation of the issuer. Any supplements to the prospectus must also be submitted to the FMA for approval as well as be published and lodged with OeKB immediately. The FMA has to approve the supplement within seven bank working days and send an official copy of the approval to the Notification Office of Oesterreichische Kontrollbank Aktiengesellschaft (OeKB). The company must lodge the approved prospectus with the Notification Office of the Oesterreichische Kontrollbank AG (OeKB) as soon as possible, at the latest on the day of the publication of the prospectus. The process of approval takes usually two to three months from the filing of the first (incomplete) draft until the final (approval) version. During this process, the FMA provides their comments to the filed drafts in writing to the lawyers of the company. The float team discusses the comments and amends the draft prospectus accordingly for the next filing. This process lasts until the prospectus is accepted by the FMA and ready for filing of the final prospectus which will be approved. 21
9. OFFER PERIOD The offer period in Austria is generally three or four weeks. It starts once the prospectus is approved and made available to the public. The company is not allowed to offer or sell the shares to the public before the prospectus is approved and made available to the public. 9.1. No public offer without an approved prospectus Once the prospectus is finalised, it is should be submitted to the FMA for approval. After the approval the prospectus must be immediately made available to the public. The public offer of shares is only permitted if the approved prospectus was made available to the public not later than one banking day prior to the offer. Besides, in the case of an IPO of a class of shares not already admitted to trading on a regulated market and to be admitted to trading for the first time, the prospectus must be published at least six working days prior to the end of the offer. The public offer of securities for which no approved prospectus or supplement to the prospectus have been published in a timely manner is punishable by a prison sentence of up to two years or by a fine of up to 360 times the daily fine rate as set by the court. 9.2. Offer period The offer period for IPOs in Austria generally runs from three to four weeks. During the offer period, the underwriter and the company market the float to institutional and retail investors and monitor the level of interest in the float. 9.3. Supplements, Right to Withdraw Every significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities must be mentioned in a supplement to the prospectus if it occurs in the period between the approval of the prospectus and the final closing of the offer to the public or the beginning of the trading on a regulated market (see Section 4.1.7). Investors who have already agreed to purchase or subscribe to the securities before the occurrence of an event, incorrectness or inaccuracy but prior to the publication of the relevant supplement have the right to withdraw their acceptance, exercisable within a period of two working days (or seven working days if they are consumers) after the publication of the supplement. 22
10. LIFE AFTER THE FLOAT After the float, the company will have to comply with the rules and requirements of the VSE. Especially companies listed on the Regulated Market are subject to higher transparency and disclosure obligations under the Stock Exchange Act. In order to ensure compliance with these obligations, the company will have to set up appropriate procedures and rules within the company. 10.1.On-going obligations of the VSE 10.1.1. On-going disclosure obligations under the Stock Exchange Act (regulated market) Regulated Market (Official Market and Second Regulated Market) Publication of (audited) financial statements Publication of half-year financial statements Publication of interim reports or quarterly reports for 1Q and 3Q Ad hoc disclosure Measures to prevent insider dealings (Issuers Compliance Regulation) Directors dealings Changes of major holdings Stock buy-back program Annual information* Not later than four months since the end of the relevant reporting period, accounting according to IFRS (for consolidated statements). Not later than two months since the end of the relevant reporting period, accounting according to IFRS (for consolidated statements). Interim reports not later than six weeks since the end of the relevant reporting period or optionally quarterly reports: not later than two months since the end of the reporting period according to IFRS (for consolidated statements). Disclosure of inside information information of precise nature which has not been made public, relating to the issuer or its financial instruments which could have a significant effect on the price of the financial instruments, since it could serve as a basis for an informed investor to take an investment decision. A written previous notification to VSE and Financial Market Authority (FMA) and disclosure to the public is required. Issuers Compliance Regulation issued by FMA stipulates rules for circulation of inside information in the company and measures to be taken by the company in order to prevent an abusive use or circulation of inside information. Mandatory disclosure of any changes in the shareholding of members of corporate bodies and senior management of a company to the FMA within five working days after the threshold of 5,000 is reached Mandatory disclosure by shareholders within two trading days of a percentage of the shareholding when reaching, exceeding or falling below certain thresholds (five, ten, 15, 20 per cent etc) to the FMA, the VSE and the company. The company must publish the notification of a shareholder within two trading days after its receipt. In case the company acquires or sells its own shares publication within two trading days of a percentage of its own shares when reaching, exceeding or falling below the threshold of five or ten per cent of voting rights. Yearly publication of a document containing or referring to the information already published by a company, as required under the European Community and national law, in the preceding 12 months. 23
Regulated Market (Official Market and Second Regulated Market) * This obligation was abolished by Directive 2010/73/EU (to be transposed into national law by 1 July 2012) See also Attachment 1 for on-going obligations on different market segments of the VSE. 10.1.2. On-going obligations subsequent to an admission to the Third Market Under the Rules for the Operation of the Third Market of the VSE, for the entire period during which financial instruments are traded on the Third Market an issuer (or an exchange member) must disclose to the VSE important information on the issuer and its financial instruments as well any material changes immediately. Important information includes: changes of the legal status of the issuer; changes of the company name of the issuer; and changes of the capital of the issuer. 10.1.3. Dealing with shareholders Under the Stock Exchange Act the company must treat all shareholders that are in the same situation equally (non-discrimination rule). The company must ensure that all facilities and information that the shareholders need to exercise their rights are available in the home member state of the company and the integrity of the data is preserved. In particular, the company must inform the shareholders on the place, time and agenda of general meetings; send to every person who has the right to take part and vote at a general meeting, a power of attorney form, either in paper form or, if applicable, by electronic means; name a credit or a financial institution as authorised body through which the shareholders can exercise their financial rights; announce the allotment and payout of dividends and the issue of new shares as well as of changes to the by-laws and rights relating to the allotment, subscription, withdrawal or exchange of shares. 24