Issuer's Guide

Who is the Issuer and what is the IPO?

The issuer is a company or a public corporation (for instance a municipality or a state) who issues securities above all for the purposes of financial gain for development of its business activities. Based on the type of the company or its interest, the issue can be in the form of different securities, out of which the most well-known ones are shares, bonds and participation certificates. IPO (Initial Public Offering) is a commonly used term for the primary public offering of shares related to an entry to the stock market. It represents an entry of a company to the Exchange, thanks to which the shares of the company will be traded on the securities market.

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Benefits of an IPO

An IPO not only provides new funds but also constitutes many advantages for the company. It is something that is very hard to describe, yet something essential for all publicly traded companies – equity culture. Upon its admission to the capital market, the company becomes one of the top companies in the region, thereby gaining prestige, which represents not only a useful tool but also a commitment.

Share placement is profitable for the wider economy. Strong companies are the foundation of prosperous development. Companies gain the equity acquired through the stock exchange and use it for large investments. The companies are thus more competitive, existing jobs are better remunerated, and new jobs are created.

Specifically, an IPO has the following advantages for the company:

  • Increased prestige for business partners
  • The company’s visibility abroad – the status of a listed company is perceived as a symbol of prestige
  • Possibility of repeated financing rounds (repeated share offers)
  • Improved position with other funding institutions – diversification of funding, reduced dependence on one type of funding
  • Immediate valuation of the company not only on the basis of the book value but also taking into account the future value
  • Employee motivation through the option scheme
  • Interest-free capital
  • Freedom in the management of capital
  • Possibility of choosing the degree of control over the company and the level of commercial risk
  • Easier access to other forms of financing
  • Spread of risks and unlimited resources
  • Optimization of the capital structure
  • Increased involvement of the management and other top employees
  • Publicity and visibility

Key requirements for a successful IPO candidate

  • Clear corporate strategy
  • Interesting corporate story with the potential to attract investors
  • Experienced management
  • Clear corporate structure
  • Good transaction timing
  • Readiness to share some information

IPO team and lead manager

Good preparation and the selection of an experienced team are absolutely essential for a successful IPO. The external IPO team usually consists of an investment bank, which also acts as the lead manager, the head and coordinator of the entire external team and a legal advisor with experience in similar transactions on the capital market. The team also includes one or several other investment banks that help with the initial public offering, i.e. allocation.

What will your IPO team do for you? In particular, it will involve these basic activities:

  • Prospectus
  • Materials on the offering
  • Share placement
  • Settlement
  • Listing and trading

The lead manager is the principal associate and partner of the future issuer and has the following functions:

  • Together with lawyers and auditors, he participates in the preparation of the prospectus, cooperates on legal, commercial and financial audits and performs the first valuation on the basis of the information obtained.
  • He prepares materials on the offering for future investors and presentations for analysts, who will monitor the issue and make investment recommendations to investors
  • He proposes the basic parameters of the new issue to the issuer – the number of shares issued, the approximate price per share (price range)
  • He organises roadshows for the issuer, i.e. meetings with investors where the issuer presents and offers shares for sale to investors
  • He performs “bookbuilding” for the issuer, i.e. he records the demand for its shares from investors during roadshows
  • After the subscription based on bookbuilding is completed, he determines the allocation to individual investors, i.e. how many shares each investor will get to purchase, and also determines the final price per share (the price and number of shares will be added to the issue prospectus)
  • He contractually guarantees that the shares will be purchased and paid for within a specified deadline
  • He files an application for admission to issue trading with the Prague Stock Exchange.
  • During the first day of trading, he acts as the “market maker”/stabilizing agent and supports share trading by his trading

Are you a smaller innovative Czech company and would you like to enter the stock exchange? Try entering the START Market

START Market is a market for small innovative companies that are worth more than EUR 25 million and want to raise new capital or whose owners want to withdraw partially or completely from the current business to capitalize their existing activities. The advantage of START over other similar markets in Europe is minimal costs for the issuer. The price of new capital is therefore competitive compared to any other form of funding or exit.

START Market website