Start up law - Ipo and crowdfunding

Question 1

What an IPO?

Answer 1

When a company sells shares to the public for the first time.

Question 2

what’s the role of the underwriter?

Answer 2

They are usually experts on assessing the value of a company, managing the IPO process.

• Conducts a roadshow → Visits institutional investors
• Sets the IPO price → Determines what investors are willing to pay.
• Buys the shares from the company and resells them → Ensures all shares get sold.

Question 3

What is a prospectus?

Answer 3

A legal document containing all financial details and risks of the IPO

Question 4

What is Free Float?

Answer 4

The portion of shares available for public trading on the stock market.

Question 5

What’s Due Diligence?

Answer 5

its a report, a comprehensive financial analysis for investors.

Question 6

Who is the book runner?

Answer 6

The lead underwriter that organizes investor demand.

Question 7

What happens to the preferred shares during an IPO?

Answer 7

mandatory conversion of the preferred shares into common shares (reason: as many shares from the same class as possible)

Question 8

What is crowdfunding?

Answer 8

Raising money online through platforms. Alternative for a VC. But, you need to prepare a information anyway, which is demanding, risky, legally complex and costly.

It may cost even a million so in early stages starts don’t do it.

Question 9

Why are investors more interested in Public companies?

Answer 9

They are more liquid, can diversify their portafolio, easier to find a buyer.

Question 10

How is crowdfunding regulated under EU law?

Answer 10

• The advice or selling of securities can do EXCLUSIVELY through financial intermidates.
• Financial intermediates are not allow to sell to retail investors, investments that are not suitable or are too risk for the investor (specially non profesional investors).

Question 11

List some characteristics of crowdfunding

Answer 11

• There are many different types of crowdfunding, (we are focusing in Equity Crowdfunding = Investors receive shares instead of rewards)
• max that can be offered €5 million
• Platforms must remain neutral. Projects are selected in a professional fare way
• Due diligence is minimal, but platforms should offer key investment info sheets
• Risk warnings required
• Crowdfunding must not exceed 10% of company ownership.
• There is a pre-contractual reflection period