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EQUITY FINANCE > 2 - Flotations: Offer & Listing Application Process > Flashcards

2 - Flotations: Offer & Listing Application Process Flashcards

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1
Q

What sort of offer should a specialist company that is generally unknown to the public make, and why?

A
  • Institutional offer
  • Unlikely to attract same demand from retail investors as recognised household names.
  • Marketing - focused on institutional investors through the use of roadshows during the bookbuilding process.
  • Process = might be cheaper than retail offering; depends on extent of the marketing process.
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2
Q

What are the benefits of carrying out a Global Offer rather than a UK domestic issue?

A
  • Shares offered to wider group of investors
  • E.g. European / US market.
  • Flotation - would help increase company profile further in these markets
  • Additional interest in the fundraising could also increase price at which shares are sold to the investors.
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3
Q

What does book building allow companies to do?

A
  • Allows company to gain idea of the level of demand for its shares
  • And to set a realistic price for them
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4
Q

What is bookbuilding frequently used for?

A
  • Institutional equity offerings.
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5
Q

What happens with an institutional offer that has no retail element?

A
  • Issuer may use a pathfinder in the bookbuilding process
  • To provide potential investors with information about the company

Retail offer - issue will often use a price range prospectus

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6
Q

When bookbuilding is used, how are presentations made?

A
  • In form of roadshows
  • To potential institutional investors
  • Usually the same institutions and individuals approached in a placing
  • They then bid in advance of the offer for securities to be issued.
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7
Q

Are the offers made by institutions and individuals when book-building is used legally binding?

A
  • No
  • Must state the number of shares they would be willing to purchase
  • And price they are willing to pay for such shares within the price range
  • Either given by Global Coordinator / stated in a price range prospectus
  • Level of demand shown by potential investors will determine issue price of securities.
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8
Q

Why is bookbuilding generally advantageous for an issuer?

A
  • By assessing demand for company shares in ADVANCE of the issue price that is being set
  • Issue price can be calculated more accurately
  • And set at highest realistic level
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9
Q

When is the prospectus required and where is this found in the statute?

A
  • S85(1) and 85(2) FSMA
  • Have to apply both tests
  • Transferable securities being offered to public in EEA
  • Or app being made for this and no exemptions are available.
  • If either test satisfied and no exemption - prospectus will be required
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10
Q

Explain test 1 of the prospectus test: S85(1)

A
  • Offer of transferable securities to the public in the UK.
  • Have to see if there are any exemptions
  • Offer of securities to the public - is set out in s102B FSMA
    • Any communications by any form / means - s102B(3) FSMA
    • S102B(1) FSMA
    • S102B(2)
    • S102B(4) - this includes placing of securities through financial intermediaries
  • Issuer will need to produce a prospectus in relation to a placing unless it can bring itself within an exemption to Test 1
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11
Q

What are the exemptions to test 1 of the prospectus test?

A
  • 2x categories of exemption
  • S86(1) FSMA - offers that are made to qualified investors / to fewer than 150 people in each EEA state
  • Exempt securities -
    • Parts 1 and 2 Schedule 11A FSMA - s85(5)(a) FSMA
    • PR 1.2.3 - s85(5)(b) FSMA
    • Includes securities that are issued in the context of certain types of transactions, such as bonus issues.
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12
Q

Test 2 and its exemptions?

A
  • Test: s85(2) FSMA
  • Only 1 exemption -
  • Part 1 of Schedule 11 A FSMA
  • Listed in PR 1.2.3R
  • 85(6)(a) & (b) FSMA
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13
Q

As well as the specific disclosure requirements in the PR, what are the additional requirements for disclosure in a Prospectus?

A
  • S87A(2) FSMA
  • PR 3.1.2A - applicant make sure that all necessary information is included
  • Contain all info necessary to enable investors to make an informed assessment of
    • Assets and liabilities
    • Financial position
    • Profits and losses + prospects of the issuer, and any guarantor
    • Rights attaching to the transferable securities
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14
Q

Explain the premise of the specific disclosure obligations?

A
  • PR contain specific disclosure obligations that differ depending on the nature of issuer and the type of securities being issued
  • PR 2.1.4, 2.3.1, and 2.3.1A
  • Sets out minimum information to be included in prospectus with reference to PD regulation

PD REGULATION To tab up:

  • Article 3
  • Article 21
  • Annex XVIII
  • Article 4
  • Article 5
  • Annex II of the PD Regulation
  • PR App 3.1.1
  • Article 5 of the PD regulation - Annex II of the PD
  • Article 6 of the PD Regulation
    Annex III of the PD Regulation - reproduced in PR App 3.1.1
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15
Q

What is a running check?

A
  • Lawyers - thorough DD process with the issuer to make sure that all key financial and business information, positive and negative is included in the prospectus.
  • Lawyers verify accuracy of all price-sensitive statements in prospectus
  • To make sure that no part may be miscontrued / mislead investors
  • UKLA checklists completed to make sure that all content requirements have been complied with
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16
Q

Where is the requirement for a summary found?

A
  • S87A(5) FSMA
  • Set out in PR 2.1.2
  • S 87A (6) FSMA and PR 2.1.2 - summary should convey clear information about securities
  • Contents requirements in PR 2.1.4 - which reproduces article 24 of the PD Regulation&raquo_space; and refers to Annex XXII of PD regulation
    • (put little dots on these tabs)

Key info - defined in
- ss 87A(9) & (10) FSMA, as information essential to enable investors to understand securities and to decide whether to consider the offer further
• Essential characteristics of the company and the securities and reasons for the offer

  • Summary info made up of the ELEMENTS prescribed by Annex XXII of the PD regulation
  • Must be in a 5 table format - Sections A-E
  • States which order they should go in
  • Summary information must stand alone and not contain any cross references to other parts of the prospectus
17
Q

What are the requirements for the summary information?

A
  • Not exceeding 7% of length of prospectus
  • Or 15 pages, whichever is longer - PR 2.1.4
  • Article 24 of Prospectus Regulation reproduced in PR
  • Language in which prospectus was originally drawn up - PR 2.1.6
  • Must contain the warning that is set out in PR 2.1.7
18
Q

Does a pathfinder require FCA approval? Why / why not?

A
  • No
  • A pathfinder is not a prospectus
  • But is subject to advertisement regimes set out in the Prospectus Rules
  • Formal book building - the pathfinder is used as a marketing tool during the book building process
  • Institutional investors will make non-binding commitments to purchase shares on the basis of the pathfinder
19
Q

Submission of the documents to FCA and LSE before admissions hearings - explain why these are 48hour documents?

A
  • Because they need to be submitted to FCA by midday, 2 business days prior to the listing hearing
  • Documents to include - LR 3.3.2R
    • Approved prospectus
    • Application for Admission form
20
Q

What are unconditional dealings?

A
  • Any dealings after the admission of shares to listing and trading
  • Any “grey market” or conditional dealings before admissions were conditional on admission actually taking
21
Q

What assumptions are made in the price-range prospectus?

A
  • Assumes that issuer has elected to publish fixed-price prospectus, having undertaken a period of book building
  • So that it can offer its institutional investor a fixed price offer of shares
  • PR 2.3.2R - would have to have filed final offer price and amount of shares to be issued as soon as practicable with FCASE
  • PR 3.2.4 - 3.2.6R - prior to admission and listing hearings
22
Q

If an offer is structured by way of a placing, will the exemption for qualified investors be likely to be available?

A
  • Exemption for ‘qualified investors’ is likely to be available
  • S86(1)(a)
23
Q

Will an initial retail offer on the Main Market usually require a prospectus?

A
  • Yes

EQUITY FINANCE (6 decks)

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