Going public alternatively: Initial Public Offering (IPO), IPO, IPO is the first-time offering of equity aimed at a broad group of investors, which until now has been held by a limited group of shareholders, possibly combined with a capital increase and the launch on a secondary market, a Stock exchange.
The admission to the stock exchange associated with going public can be sought in various segments, for example in official trading, on the regulated market, on the Neuer Markt or on the open market. In addition to the market organization, these differ with regard to the respective approval requirements. In principle, the legal form of an AG or KgaA, the preparation of a prospectus with certified annual financial statements for the last three financial years, as well as a certain minimum number of shares, as well as a minimum amount and minimum diversification of the share capital are required. Otherwise, liquid trading cannot develop, and institutional investors are then not ready to subscribe to the purchase offer.
Eine Voraussetzung ist de facto die Begleitung durch eine Investmentbank (bei größeren Unternehmen und Volumina oberhalb von 100 Millionen Euro) oder eine Private equity-Firma (bei Volumina zwischen 25 und 50 Millionen Euro). Somit kostet ein Börsengang durch erforderliche rechtliche Beratungen, durch weitere Prüfungen und Gebühren schon 7% der erhofften Einnahmen.
There is also a significant IPO discount: financial investors change their portfolios and only subscribe to the new shares if they can receive them at a discount compared to the value calculated during the valuation. In total, the existing shareholders and the company only receive 75% to 80% of the value of the shares.
The investment bank or private equity firm accompanies the company over a longer period of time and business policy is often interfered with. The aim is to prepare the company in such a way that it becomes attractive according to the ideas of external investors. Management often feels pressured and is required to be personally involved in the issue.
Vor dem eigentlichen Börsengang sind weitere Vorbereitungen zu treffen, darunter die Due diligence, die Erstellung des Prospektes, und die Ausarbeitung eines Businessplans, der dann möglichen Investoren auf der sogenannten Roadshow vorgetragen wird.
The issue price is set today in a two-stage process (bookbuilding). First, the issuer and advisor determine and publish a price range. This price range is based on the valuation and an exploration of the demand on the part of institutional investors in advance.
In the second step, buy orders are collected within this range in a formal offer and based on these, the uniform price for the allocation of all shares is then set. In many cases, investment banks work with a greenshoe option.
With only a few exceptions, the price rises above the issue price in the first few days of trading, a phenomenon that is known as underpricing and has found various explanations. The cyclical nature of emissions is observed. Particularly in attractive phases and market segments, so-called hot-issue markets, there is pronounced issuing activity and occasionally euphoria.
In all of this, the management should not forget that there are many alternatives to an IPO. This includes the sale to another company, for example to a financial holding or to another company that uses similar technologies or operates in the same product market.