An IPO occurs when a company begins trading on the stock market and everyone can buy and sell its shares.
This type of operation is known by the acronym IPO ( Initial Public Offering ); and a company usually carries it out to access financing from the capital market with the intention of accelerating its growth and providing itself with the necessary resources to develop its business plan or to generate the opportunity for its private shareholders to obtain liquidity.
The Stock Exchange is the answer to the objective of many companies that want to take a leap in dimension and consolidate their project.
Going public is a strategic business decision that opens the company up to a new environment of opportunities and advantages.
However, access to the securities market requires compliance with some prerequisites and a subsequent choice of the procedure that best suits the needs and objectives of the company.
Minimum requirements to meet for the IPO of a company
Royal Decree 1310/2005 of November 3 and Circular 2/2016 of the Stock Exchanges establish the minimum requirements for admission to trading, which in summary are the following:
- Issuer suitability. Shares issued by Spanish and foreign public limited companies, whose share capital is fully paid up and for which there is no legal or statutory restriction that prevents the negotiation and transferability of their shares, may be listed on the Stock Exchange. Spanish SAs that request the admission of their shares to trading on the Stock Exchange will have a Minimum share capital of €1.202.025. For the purposes of determining this minimum, the portion of capital corresponding to shareholders, each of whom holds, directly or indirectly, a share, will not be taken into account. minimum equal to or greater than 25%.
- El total amount of the shares whose admission to trading is requested must be at least €6.000.000. When applying for admission to trading of shares on a stock exchange, it is necessary that, prior to or at the latest on the date of admission to trading, there is a sufficient distribution of such shares in one or more EU Member States. According to the art. 9.7 RD 1310/2005, A sufficient distribution will be considered to exist if, at least, the 25 % of the shares for which admission is requested are distributed among the public, or if the market can operate adequately with a lower percentage due to the large number of shares of the same class and their degree of distribution among the public. The negotiable securities for which admission is requested must be represented in book entries, that is, in a computerized accounting record of Iberclear.
Information requirements for IPO
The admission of securities to trading on an official Spanish secondary market will be subject to prior compliance with the following information requirements:
- The contribution and registration in the CNMV of the documents proving that the issuer and the securities are subject to the legal regime applicable to them, determined in accordance with the consolidated text of the Securities Market Law approved by Royal Legislative Decree 4/2015, of October 23.
- The contribution and registration with the CNMV of the issuer's annual accounts, prepared and audited in accordance with the legislation applicable to said issuer. These must refer, at least, to the last three years in the case of participatory securities, and to the last two years in other cases. The CNMV may accept annual accounts from the issuer that cover a period shorter than that indicated when it decides in the interest of the issuer or the investors, provided that it considers that the investors have the necessary information to form a well-founded opinion about the issuer and the securities. whose admission to negotiation is requested.
- La input, approval and registration with the CNMV of an information prospectus, as well as its publication.
Good corporate governance
In any case, from the moment of incorporation of the company, which must be anonymous in case the strategic business decision seeks the objective of going public, special attention must be paid to corporate governance.
This is the set of rules, principles, and procedures that govern the structure and operation of a company's governing bodies . It establishes the relationships between the board of directors, the executive board , shareholders, and other stakeholders, and stipulates the rules governing the company's decision-making process for value creation.
Good corporate governance is the foundation for the functioning of markets, as it fosters credibility and stability and contributes to driving growth and wealth creation . The corporate governance system has three main layers derived from:
- legal regulations. Corporate governance is important when it comes to complying with current regulations. In particular, Title XIV of the Capital Companies Law refers to listed corporations; and among other topics, it addresses the classification of directors (executive and non-executive), the executive president (coordinating independent director) and the Management Committees (Audit Committee and Appointments and Remuneration Committee).
- National codes of good governance. The relevance of good governance lies in the declaration of the degree of follow-up of the recommendations included in the Good Governance Code of listed companies, published by the CNMV in February 2015. The instrument for said follow-up is the Annual Corporate Governance Report, which announces certain recommendations of good practices governed by the principle of “comply or explain”.
- International good practices. In 2017, more than 40% of the shareholding of Spanish listed companies belonged to foreign investors. The participation of institutional investors in corporate decisions is very active. In this context, knowing the capital structure of the Company becomes a necessity, as well as knowing the market expectations through the proxy advisor and their voting policies (BME, 2019).
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