THE MAIN MARKET AN ISSUER’S GUIDE TO LISTING ON THE WARSAW STOCK EXCHANGE
2017
1 gpw.pl
This Guide should not be relied upon as a source of legal or financial advice. It was prepared to the highest standards of due care, based on the qualifications, knowledge and expertise of its authors. The information contained in this Guide is correct at the time of publication. The views expressed in this Guide are those of its authors. The solutions available to issuers of securities as presented in this Guide should not be taken as the official views or opinions of the firms or other entities affiliated with the authors. Thus, the authors, consultants and the editorial team assume no liability for any action taken in reliance on any advice or recommendation contained in this Guide.
2 Foreword
”For the service of merchants of all nations and languages” were the words inscribed on the building housing what is believed to be the world’s first stock exchange in Antwerp, Belgium. Although the political and economic landscape has greatly changed since its establishment in 1531, the proposition remains valid. A stock exchange today still provides a space for the business community to meet, exchange information, compete fairly, and collaborate.
In furtherance of its mission, the Warsaw Stock Exchange actively facilitates exchange of information among investors, issuers, investment firms, and advisers, while promoting the highest standards of sustainable development, corporate governance and corporate social responsibility of the listed companies. The Warsaw Stock Exchange takes a range of steps to assist potential issuers to prepare for and carry out their initial public offerings (IPOs). To meet the needs and expectations of companies interested in raising finance for further development through the Warsaw Stock Exchange, we have teamed up with capital market practitioners to write this Guide. Our partners are actively engaged in the various sectors of the capital market, and one aspect of their activities is to guide issuers through the entire IPO process. We are proud to see these reputable and experienced firms sharing their practical knowledge of the IPO process with you.
We hope that you will find this publication useful in understanding the practicalities and leveraging growth opportunities offered by the Polish capital market.
Warsaw Stock Exchange Client Relations Team
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 3 Contents
IPO basics 6
INTRODUCTION 7
Legal framework for IPOs 16
LAWS AND REGULATIONS GOVERNING INITIAL PUBLIC OFFERINGS IN POLAND 17
OFFERINGS BY POLISH COMPANIES AVAILABLE TO FOREIGN INVESTORS 20
CHANGING THE FORM OF INCORPORATION ...... 20
LEGAL BASIS OF SHARE ISSUE 22
IPO preparations – advisers and timetable 23
IPO ADVISERS 24
IPO/LISTING TIMETABLE 26
IPO preparation – prospectus 30
PROSPECTUS – THE LEGAL ASPECTS ...... 31
ADMINISTRATIVE PROCEDURES ...... 35
LIABILITY 35
Financial reporting in a public offering 36
FINANCIAL STATEMENTS ...... 37
PRO FORMA FINANCIAL INFORMATION 38
COMPLEX FINANCIAL HISTORY ...... 38
PROFIT FORECASTS OR ESTIMATES 39
SELECTED FINANCIAL INFORMATION ...... 40
OPERATING AND FINANCIAL REVIEW ...... 40
INFORMATION ON CAPITAL RESOURCES ...... 40
STATEMENT OF CAPITALISATION AND INDEBTEDNESS ...... 40
WORKING CAPITAL STATEMENT 40
STATEMENT OF SIGNIFICANT CHANGES 40
UNAUDITED FINANCIAL INFORMATION 40
AUDITOR’S ROLE ...... 40
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 4 Contents
Corporate Governance – ”le savoir vivre” for public companies 42
WHY DO COMPANIES NEED CORPORATE GOVERNANCE PRINCIPLES ANYWAY? ...... 43
TO APPLY OR NOT TO APPLY? 43
DETAILED CORPORATE GOVERNANCE PRINCIPLES ...... 44
COMPLIANCE DISCLOSURES 45
Premarketing, marketing and subscription 46
PREMARKETING AND MARKETING OF THE OFFERING ...... 47
ROADSHOW 48
PRICE RANGE AND FINAL IPO PRICE 49
FORMING THE MANAGERS’ SYNDICATE ...... 52
DISTRIBUTION SYNDICATE IN THE RETAIL TRANCHE 54
SETTLEMENT OF THE IPO AND REGISTRATION OF NEW SHARES 56
Investors – targets of IPO transactions 59
TARGET INVESTOR GROUPS IN IPOS 60
INVESTOR PROFILES 61
IPO STRUCTURING BY TARGET INVESTOR GROUPS 61
The public life of the company 65
GOOD DISCLOSURE POLICY BUILDS VALUE FOR SHAREHOLDERS AND PROSPECTIVE INVESTORS . . 66
Definitions of terms 69
Contributors 72
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6 IPO basics
INTRODUCTION The key advantages of being a public limited company are set out below: Why go public?
On its 25th anniversary, the regulated market of the Warsaw Benefits to the company Stock Exchange was home to over 430 Polish and 50 foreign companies, but the overall number of companies ever to be nn access to finance for further development listed on the market over the WSE’s history is much greater. nn enhanced credibility with customers, business partners, and financial institutions Joining an organised capital market is a milestone on the path towards growth for any company. Enquired about how to nn balance sheet bolstered with new equity raised achieve further growth, shareholders in one company which chose to seek admission to exchange trading and listing nn ability to raise capital through further issues and to finance through an IPO, said: acquisitions with shares
nn heightened public profile and brand recognition
”By attracting a wide set nn ability to use share-based management incentive schemes of investors to share the nn having the strategy and plans objectively evaluated by company with and by analysts and investors benefiting from the capital Benefits to shareholders raised in the process.” nn ability to monetize holdings of shares nn placing current market value on company shares This is the single most important reason for seeking admission to a public market in a nutshell. The benefits of the strategic nn option to exit the business in the future decision to go public can be broadly divided into benefits that accrue to the company itself and to its shareholders. nn liquidity of shares, which may at some point be used as a means to fund acquisitions or as collateral
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As you can see, a flotation on the regulated stock market Debt and equity financing options not only provides access to finance but also opens new opportunities, enabling the company to raise additional The two main sources of capital available to a company capital in the future (e.g. through issues of corporate debt), are its owners (shareholders) and lenders. These sources finance acquisitions with own shares, and implement share- can complement each other, and the choice of the capital based management incentive schemes. The heightened public structure and financing options depends on the stage of the profile and increased confidence of customers, partners and company’s development as well as its needs and capabilities. banks are also vital. Presented below is a brief description of the various methods The listed status of a company brings tangible benefits to the of financing a business, along with key advantages and shareholders as well. They can sell a portion of their holdings disadvantages. in the IPO, have a market value placed on their shares, and are provided with an option to sell their shareholdings in the future.
Financing sources for corporations
PUBLIC MARKET SHARE ISSUE BOND ISSUE
flexibility in setting time frame and terms of in theory, unlimited source of capital interest payments heightened public profile no collateral required in some cases enhanced credibility with business partners periodic interest payments with principal repaid at maturity
allowing new shareholders to participate in coupon usually higher than interest on bank decision making credit, plus issue costs DEBT disclosure requirements EQUITY exclusive control of the company interest usually lower than bond coupon no disclosure requirements
principal and interest usually paid limited source of capital, depends on owner’s simultaneously resources little flexibility in setting credit terms collateral required in most cases
OWN FUNDS BANK CREDIT NON-PUBLIC MARKET
Source: mBank in-house analysis
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When seeking funding sources, businesses at an early stage subsequent issues of shares and debt instruments, chiefly of development first turn to the non-public market – founders bonds. Public debt offerings enable companies to raise debt and owners (equity) as the first choice, most often followed finance (in addition to bank credit), which provides greater by banks (credit) as their second choice. flexibility in terms of permitted use of proceeds, collateral arrangements, and repayment schedules. As investors usually More mature businesses can tap into the public market, require that bonds be publicly traded, in 2009 the WSE Group which has an important advantage over other options in launched Catalyst (www.gpwcatalyst.pl), a platform for that financial investors (including mutual and pension funds) trading in debt instruments. normally adopt a passive investment policy of not interfering with day-to-day management of the business by what they IPO success factors believe to be competent executive staff, and expect successful delivery of strategic objectives, transparency, and integrity in The success of a public offering – as measured by the final fulfilling disclosure requirements. valuation, size and diversity of demand, and general market response – largely depends on a number of factors within By floating its shares on a stock exchange – which obviously the control of the company itself, its management and entails increased transparency and mandatory compliance shareholders, as well as professional advisers engaged to with disclosure requirements – a company gains access to assist the company with IPO preparations. the broadest possible range of investors, including investors in debt securities. Past experience shows that for many The diagram below illustrates the key factors for a successful companies a listing on the Warsaw Stock Exchange was only IPO. the first step on the way to raising more capital through
Key IPO success factors
nn reputable and experienced team of advisers nn review of the company’s and shareholders’ objectives in the context of stock market practice IPO preparations and investor expectations nn due diligence nn identification and fair description of relevant risk factors
nn clear strategy, sound business plan, and effective use of proceeds Compelling equity nn identifying factors that contribute to value growth story nn positioning versus peers
nn global trends and situation on the WSE Right timing nn investor sentiment towards the sector or industry nn competition from similar transactions
nn extensive investor education (research report, premarketing) Quality transaction nn effective investor communication execution nn maximising IPO price with high quality investor base nn ensuring adequate liquidity of shares
Source: mBank in-house analysis
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An IPO should be well prepared to help the company and competitive strengths, and its shareholders to achieve their objectives and overall transaction success. As an essential part of the process, the positioning versus peers. company has to prepare itself for the transaction. To this end, professional advisers will assist it in making certain adjustments in line with capital market practice and investor As a rule, comparing favourably with direct competitors in expectations, which may involve discussion of the transaction terms of scale and efficiency greatly improves the chances size and structure, change of the form of incorporation (into of a successful flotation. Investors will be interested to know a joint-stock company), organisational changes within the their potential returns as measured by the amount of declared group, or managing the sensitive business areas identified dividends or anticipated rate of the company’s growth in the by the advisers as those posing a potential risk to the future. The business model and its profitability will also be put transaction. under scrutiny, and leaders in their industries boasting strong brands stand a greater chance of success. Although most One may assume that to be eligible for listing on the WSE, investors will be attracted to companies in promising new a company must earn a minimum EBITDA of approximately industries, dividend-paying old economy businesses may also PLN 9–10m and a minimum net profit of approximately PLN prove interesting to them. A company should have a simple 7–9m, although companies which fall outside this range but organisational structure, stable ownership, and a seasoned have realistic growth potential based on solid foundations will management team. Shareholders should be prepared for also be taken into account. In certain industries other financial the dilutive effect of the IPO and recognise the corporate measures will be considered, such as net book value of assets governance principle: ”the higher the risk, the greater in the case of real estate companies. The Warsaw Stock the reward”, meaning that a shareholder’s position in the Exchange has set a formal requirement for companies to have company is determined by how many shares they own. Stock a minimum post-IPO market capitalisation (value) of PLN 60m market investors tend to frown upon any form of preferential (or the PLN equivalent of EUR 15m – this requirement does treatment of the existing shareholders. not apply to issuers who have had at least one issue of shares with a minimum market capitalisation of PLN 48m or the PLN Also, critical is choosing the right time to IPO, both in equivalent of EUR 12m traded on another regulated market terms of the stage of the company’s development, overall or on NewConnect for at least six months). Public offerings of conditions in its industry, capital market sentiment, and value exceeding PLN 300m have historically attracted foreign other public offerings competing for investors’ money. IPO institutional investors, generating additional demand for the preparations take months, and the market landscape may offered shares. change in the meantime.
Market practice and past experience show that the best time In order to have in a company’s life to go public is the period of rapid growth, when its earnings grow the fastest and when it needs money a successful IPO, a company to invest in positioning itself for the future. Of course, it is difficult to predict what happens in the years to come and must also develop a clear, whether the time is ripe to float the shares, but what can be said for certain is that investors will not buy promises coherent and compelling unsubstantiated by performance nor invest in a company equity story showcasing which has exhausted its potential to expand. its growth strategy,
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 10 IPO basics
IPO momentum – the best time to float shares
Optimal timing Financial results
Time
Source: mBank in-house analysis
It is a smooth and professional execution process that will IPO structure determine the final outcome of the many months of IPO preparations. The investment firm’s professional approach In consultation with partner investment firms, the existing to this phase of the transaction is crucial. It is important to shareholders must determine the structure of the planned understand investor expectations, have a good grasp of the IPO. To start with, they need to identify the company’s capital market practice, and enjoy close relationships with market needs and determine the number of shares to be issued. participants to see the company through this intense and They also need to decide on the future shareholder structure, dynamic process. A lot of attention must also be paid to i.e. how many shares (and voting rights) will be held by new investor education both during presentation of the research shareholders (stock market investors). This will inform the report written by the investment firm’s analysts and during decision on the number of new shares to be offered in the the management roadshow. The marketing effort is what IPO and on whether the existing shareholders will be able to determines results of the book-building process and, sell their holdings in the offering. It is important to note that consequently, the final pricing, quality and structure of the most investors prefer to buy new shares – historically, growth investor base, and the overall transaction success or failure. companies investing in new capacities or acquiring industry peers have attracted more investor interest. As a rule, new shares are allocated to investors before existing shares if no sufficient demand is secured for all shares in the offering.
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Number of IPOs floated on the WSE, by IPO structure (January 2012 – December 2016)
38 23 Only new shares
New and existing shares
Only existing shares
17
Source: mBank in-house analysis based on publicly available data on Polish and foreign companies floated on the WSE between January 2012 and December 2016
Value of shares offered in IPOs, by IPO structure (PLN bn; January 2012 – December 2016)
3,8 9,2 New shares
Existing shares
Source: mBank in-house analysis based on publicly available data on Polish and foreign companies floated on the WSE between January 2012 and December 2016
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In Poland, most of the institutional investors). Advice provided by knowledgeable advisers with a market insight into how ownership should companies listed on the be structured is of paramount importance. It should be remembered that retail investors are often short-term WSE have a controlling opportunistic buyers. In contrast, large institutional investors (often holding over 5% of a company’s total share capital) shareholder, usually its can afford to invest for a medium to long term and to raise their holdings at times of unexpected supply shocks on the founder or a strategic market. Stable and reputable shareholders contribute to building a positive image of the company. investor. Also, investors and the Warsaw Stock Exchange expect companies to ensure an appropriate level of free float. At Only a small proportion of listed companies are controlled least 15% (in the case of the parallel market) and 25% (in the by financial investors (mutual or pension funds). Many case of the main market) of shares which are to be admitted companies are owned by their founders who now sit on to trading should be held by minority investors (each holding their management boards. The controlling shareholder plays less than 5% of total voting rights). In the case of the main a prominent role in IPO preparations, as his cooperation with market, the free-float requirement is also met if at least management and advisers is vital to the offering’s success. 500,000 shares with a value of EUR 17m or more are held by At this point, it is crucial to establish what the controlling small shareholders. shareholder’s and management’s future plans are with respect to the company. They need to decide what amount of control The table below presents companies which floated their IPOs of the company they want to retain in future. A message that on the WSE in 2015–2016. the management team have no intention of selling down their holdings will certainly contribute to a successful IPO. Financial investors tend to favour companies with an anchor shareholder, at least in the initial period after the flotation.
In structuring the offering, at least preliminary arrangements should be made on how the shares will be split between institutional and retail investors. Market practice shows that institutions generate a vast majority of demand in an IPO (roughly 80%–90%). When allocating the shares, there is a balance to be sought between the varying interests of the company and its shareholders – high liquidity of shares (a large proportion of retail investors) versus stability of the stock price at times of market turmoil (a large proportion of
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Companies with IPOs floated on the WSE in 2015–2016
IPO structure New shareholders as IPO value First listing No. Company Industry percentage of share (PLNm) New Existing date shares shares capital Biuro Inwestycji 1 Real Estate 20.3 100% 0% 27% 2016-11-23 Kapitałowych 2 Artifex Mundi Video Games 99.4 11% 89% 44% 2016-11-17 3 Stelmet Wood 182.1 25% 75% 20% 2016-10-25 4 PlayWay Video Games 62.4 50% 50% 18% 2016-10-19 5 Celon Pharma Pharmaceuticals 245.0 100% 0% 33% 2016-10-17 Automobiles 6 Auto Partner 85.4 59% 41% 33% 2016-06-06 & Parts 7 i2 Development Real Estate 34.0 100% 0% 18% 2016-05-19 X-Trade Brokers 8 Financial Services 189.0 0% 100% 14% 2016-05-06 Dom Maklerski Polski Bank Komórek Medical/ 9 56.4 0% 100% 25% 2016-04-29 Macierzystych Healthcare Medical/ 10 Master Pharm 29.1 62% 38% 23% 2016-04-29 Healthcare 11 Archicom Real Estate 72.2 100% 0% 20% 2016-03-22 12 Sare Advertising 0.8 100% 0% 1% 2016-02-15 13 Krynica Vitamin Food 26.4 74% 26% 18% 2015-12-16 14 Lokum Deweloper Real Estate 36.0 100% 0% 17% 2015-12-15 Transport 15 Enter Air 98.0 100% 0% 40% 2015-12-14 − airlines 16 Korporacja KGL Materials 33.3 100% 0% 24% 2015-12-10 17 Kofola ČeskoSlovensko Food 120.8 18% 82% 7% 2015-12-09 18 Wittchen Retail 55.3 49% 51% 18% 2015-11-09 19 Inpost Postal Services 121.4 0% 100% 42% 2015-10-13 Medical/ 20 Adiuvo Investments 22.0 100% 0% 11% 2015-10-12 Healthcare Electronic 21 APS Energia 7.8 100% 0% 6% 2015-10-08 Equipment Electronic 22 AAT Holding 57.5 0% 100% 30% 2015-10-05 Equipment Media & Telecom- 23 Wind Mobile (Ailleron) 10.7 55% 45% 11% 2015-09-25 munications 24 Esotiq & Henderson Retail 17.3 100% 0% 20% 2015-07-16 25 Pekabex Construction 73.7 41% 59% 30% 2015-07-08 Medical/ 26 Braster 39.0 100% 0% 46% 2015-06-24 Healthcare 27 Atal Real Estate 143.0 100% 0% 17% 2015-06-15 Automobiles 28 Uniwheels 504.0 50% 50% 39% 2015-05-08 & Parts 29 Wirtualna Polska Holding Media/Commerce 294.2 36% 64% 33% 2015-05-07 30 Idea Bank Financial Services 254.2 100% 0% 14% 2015-04-16 Asset 31 Private Equity Managers 45.7 0% 100% 12% 2015-04-09 Management 32 Dekpol Construction 29.3 100% 0% 23% 2015-01-08
Source: mBank in-house analysis; for information on new company listings visit www.gpw.pl
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The data shows that the majority of shares sold in initial responsible for the preparation of all legal documents related public offerings carried out over the past two years were to the IPO (including the prospectus). The market practice is new shares. On average, offerings comprising the sale of for the company to also hire a PR/IR adviser with experience existing shares are larger in terms of value. An average IPO is in ensuring proper communication with the media and made up of 63% new shares and 37% existing shares. New retail investors. Once the prospectus has been published, shareholders as a percentage of a listed company’s share the company will run an advertising campaign in the media capital range from single digits to well over 40%. It should be (notably the printed media and the Internet) to attract the noted that companies in the low end of the range are those largest possible number of prospective investors. Other costs moving from the NewConnect over-the-counter market to include fees paid to the Polish Financial Supervision Authority the regulated market and thus already have a sufficient free (prospectus approval and capital market supervision fees), float. The percentage of new shareholders averages 25%, Central Securities Depository of Poland (dematerialisation which meets the free-float requirement. fees), and the Warsaw Stock Exchange (listing and admission fees). IPO costs Typically, the larger the offering, the higher the costs in The largest cost item associated with an IPO is the fees absolute terms. Of course, in relative terms they represent of advisers helping the company through the process. a much smaller proportion of the value of issued shares These include an investment firm (a brokerage firm or the compared with small-sized offerings of up to PLN 10m. The brokerage arm of a bank), providing its services for a fee chart below presents average costs of an IPO as percentage of whose amount depends on the value of shares placed the value of new shares issued in the offering. with investors (a success fee), and legal advisers typically
Average IPO costs to the value of new shares offered by Polish companies
15.0% 12.5%
10.0%
6.2% 5.1% 5.0% 3.8% 3.2%
IPO costs IPO costs (% of the value new shares) 0.0% 0–25 26–50 51–100 101–200 pow. 200 Value of new shares (PLNm)
Source: mBank in-house analysis based on reports of companies domiciled in Poland which floated their IPOs on the Warsaw Stock Exchange between January 2012 and December 2016
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 15 Legal framework for IPOs
16 Legal framework for IPOs
LAWS AND REGULATIONS GOVERNING nn Directive 2003/71/EC of the European Parliament and of INITIAL PUBLIC OFFERINGS IN POLAND the Council of November 4th, 2003, on the prospectus to be published when securities are offered to the public or Key legislation admitted to trading, which coordinates the requirements for the preparation, approval and distribution of nn Act on Public Offering, Conditions Governing Admission a prospectus to be published when securities are offered of Financial Instruments to Organised Trading, and Public to the public or admitted to trading on a regulated market. Companies, of July 29th, 2005 (”Public Offering Act”), which defines: (i) the rules and conditions governing Definition of a public offering public offerings carried out in Poland and the admission of securities to trading on a regulated market; (ii) obligations The term ”public offering” is key to the entire IPO process. of issuers of securities and other entities participating in the trade of such securities; and (iii) consequences of becoming a listed public company, and special rights and The Public Offering Act obligations relating to the holding of and trading in shares of such companies; defines a public offering as nn Act on Trading in Financial Instruments of July 25th, 2005 a communication made in (”Act on Trading in Financial Instruments”), which defines the framework for and organisation of the capital market any form and by any means in Poland, and sets out the obligations of entities engaged in trading in financial instruments and the rules governing to at least 150 persons in supervision of securities trading; the territory of one member nn Commercial Companies Code of September 15th, 2000 (”CCC”), which provides the framework for the formation, state or to an unspecified organisation, operation, merger, demerger and change of the form of incorporation of commercial law companies, addressee, which contains including joint-stock companies, and sets out requirements for certain corporate decisions (including decisions on sufficient information on the issuing new shares) to be approved by way of a resolution; securities to be offered and nn Commission Regulation (EC) No. 809/2004 of April 29th, 2004, on information contained in prospectuses as well as the terms and conditions the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements, of their acquisition, so as to which defines, among other things: (i) the format and minimum information requirements for a prospectus; (ii) enable an investor to decide the method of publication of a prospectus; and (iii) the inclusion of information in a prospectus by reference. The whether or not to purchase regulation does not require any implementing measures, and applies directly to all potential issuers in Poland; and the securities.
A private placement, involving an invitation to acquire securities, made to no more than 149 named investors, is not a public offering.
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Virtually every public offering requires a prospectus to be Applying for registration of securities produced, approved and published. A prospectus is not required for a public offering which: Once the prospectus is approved by the PFSA, the issuer applies to the Central Securities Depository of Poland (”CSDP”) nn is only available to professional clients as defined in the Act for an agreement to register the securities offered under on Trading in Financial Instruments; the prospectus in the depository. The CSDP’s responsibilities include registration of securities and settlement of stock market nn is only available to investors each of whom acquires shares transactions. Securities should be registered upon submission with a minimum value of EUR 100,000, calculated based of the application requesting an agreement to participate in on their issue or selling price as at the pricing date, or the depository system as an issuer. nn comprises securities with a minimum unit par value of EUR The participation agreement is signed within two weeks 100,000 as at the pricing date. from the date when the relevant application and all required documents are filed with the CSDP. Once registered, Prospectus the securities are dematerialised by replacing the paper certificates incorporating the rights attached to the securities A prospectus is the principal information document published with electronic (book) entries in the relevant accounts. by issuers of securities to be offered to the public or admitted to trading on a regulated market operated by the Warsaw Detailed terms and conditions for registration of financial Stock Exchange (”WSE”). instruments in the depository are set out in the CSDP Rules.
A prospectus should present details of the securities offering Terms and conditions for admission to trading and to which it pertains, as well as the relevant risk factors listing of shares on the Main Market of the WSE and other information critical to the assessment of the issuer’s trading and financial position, its assets and growth Before securities can be traded on the Main Market of the prospects, to facilitate decision making by potential investors. WSE, they must be formally admitted to trading and listed. A prospectus is valid for 12 months after it is approved by Detailed terms and conditions for admission to trading and the Polish Financial Supervision Authority (”PFSA”), and it listing of financial instruments on the WSE are set out in the expires at the end of the day when securities in the last public WSE Rules. offering made under the prospectus are allocated to investors or the day when all securities covered by the prospectus are Admission to trading admitted to trading on a regulated market, whichever occurs later. A prospectus approved by the PFSA can be passported To have its shares admitted to trading on the WSE, the issuer into other European Union member states, allowing the issuer must satisfy the following requirements: to pursue the equity in capital markets throughout the EU. nn the issuer must prepare a relevant information document A prospectus is subject to approval by the PFSA. Once it is and have it approved by the PFSA (save for the prospectus- approved, the issuer can use it to offer securities to the public related exceptions outlined above); and subsequently seek listing and admission of the securities to trading on a regulated market. nn the issuer’s shares must be freely transferable;
For a more detailed discussion of prospectuses, see section nn the issuer must not be subject to any insolvency or IPO preparation – prospectus. liquidation proceedings;
nn the issuer must have a minimum market capitalisation (total estimated market value of all its shares post
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flotation) of PLN 60m or the PLN equivalent of EUR The WSE Management Board is required to adopt a resolution 15m (this requirement does not apply to issuers who authorising admission of the securities to trading within have had at least one issue of shares with a minimum 14 days from the filing of a complete application. market capitalisation of PLN 48m or the PLN equivalent of EUR 12m traded on another regulated market or on The WSE Management Board may refuse admission if it NewConnect for at least six months); finds any inconsistencies in the submitted documents and statements/representations or if it has any reasonable doubts nn at least (i) 15% of the shares which are to be admitted to or concerns about the company. trading on the WSE and (ii) 100,000 shares which are to be admitted to trading on the WSE with a minimum value A WSE Management Board resolution is not required to of PLN 4m or the PLN equivalent of EUR 1m, calculated authorise admission to trading of financial instruments issued based on the final selling or issue price, must be held by by the State Treasury or the National Bank of Poland. shareholders each of whom holds less than 5% of the total voting rights at the issuer’s general meeting; Listing nn the number of shareholders must be sufficient to ensure The next step after shares have been admitted to stock a liquid market for the shares. exchange trading is their listing on the WSE.
Shares will be admitted to trading on the main market of the Listing can be obtained only after the issuer has filed WSE if the following additional requirements are met: a relevant application and after the public offering has been closed, new shares have been registered by the court, and all nn the admission application covers all the shares of the same shares which are to be listed on the WSE have been admitted type; to stock exchange trading and converted into dematerialised shares in the CSDP. nn at least 25% of the shares which are to be admitted to trading or at least 500,000 shares of the issuer with a total New equity issues − application to the registry value equal to the PLN equivalent of EUR 17m or more court to register a share capital increase must be held by shareholders each of whom holds less than 5% of the total voting rights at the issuer’s general In order to float new shares on the WSE, the issuer must meeting (this requirement may be waived if the number register the new issue with the registry court. Since it is of shares covered by the admission application and the often impracticable to have a new issue registered prior to subscription or sale method allow the WSE Management the first listing date, financial instruments called ”allotment Board to reasonably conclude that liquidity of trade in the certificates” (PDAs) are used. Allotment certificates can be shares on the main market will be sufficient); traded on the public market until such time as the new shares are registered by the court, and trading in the certificates nn the issuer has published audited financial statements for is governed by the same rules and regulations as trading at least the last three consecutive financial years preceding in shares. Once the court has registered the new issue, the the admission application (or admission to trading is in issuer will make arrangements with the CSDP and the WSE the interest of the company or investors, provided that for the first listing of its shares. Allotment certificates are the company has published financial information enabling converted into shares automatically overnight. investors to assess its financial and trading position and risks associated with investing in the shares, in the form prescribed in separate regulations). In accordance with the market practice, this requirement is considered to be met if the issuer has prepared a prospectus containing the financial information specified above.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 19 Legal framework for IPOs
OFFERINGS BY POLISH COMPANIES Regulation S AVAILABLE TO FOREIGN INVESTORS Regulation S enables issuers to offer shares or other securities There are a growing number of public offerings by Polish outside the United States to institutional investors who are companies where shares are also offered to investors outside non-US persons or persons acting on behalf of US persons. Poland, but no separate prospectus has to be produced and Regulation S provides an exemption from regulatory filed with regulators in other jurisdictions and no registration registration and notification requirements for shares in other is required for the offered shares in other countries. countries.
The market practice is for issuers to invite foreign investors CHANGING THE FORM OF to acquire shares as part of ”limited marketing” undertaken INCORPORATION to inform the investors of a public offering taking place in Poland. In order to achieve the desired outcome of its Transformation of a limited liability company into marketing efforts, the issuer should prepare an International a joint-stock company Offering Circular (”IOC”), which is exempt from approval by the PFSA and from regulatory registration and notification To be able to float its shares in an IPO, a prospective issuer requirements in countries outside Poland. The IOC is not an must be a joint-stock company. A business having a different offering document within the meaning of the Prospectus form of incorporation, for instance, a limited liability company Directive and the Public Offering Act, and it may not serve as (spółka z ograniczoną odpowiedzialnością, sp. z o.o.), will the basis of any public offering. need to change its legal form.
Marketing efforts are undertaken in reliance on Rule 144A Requirements and Regulation S under the US Securities Act of 1933, which may be applied jointly or separately. It should be noted that Limited liability companies are transformed into joint-stock conducting an IPO pursuant to these rules entails higher costs companies pursuant to the Commercial Companies Code. as the company will need to hire US and UK legal and bank When considering a change of the form of incorporation, the advisers and PR agencies, and cover roadshow expenses. following requirements should be taken into account: However, the Rule 144A/Regulation S label raises the profile of the offering and of the issuer, facilitating access to foreign nn the limited liability company must have a minimum share investors. capital of PLN 100,000;
Rule 144A nn the share capital of the company post transformation may not be lower than the share capital of the company before Rule 144A enables issuers to offer shares or other securities the transformation; in the United States to qualified institutional buyers (QIB), providing an exemption from the requirements to register nn financial statements of the new company must be securities with the US Securities and Exchange Commission approved for at least the last two financial years. and to publish a prospectus. A Rule 144A offering is a private placement not available to retail investors.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 20 Legal framework for IPOs
Stages of the transformation process a notarial deed). At a minimum, the transformation plan must specify the book value of the company’s assets, measured If the requirements set out above are met, the stages of as at a specified day in the month immediately preceding transforming a limited liability company into a joint-stock submission of the plan to shareholders, as well as the value company are as follows: of the shareholders’ interests in the company calculated on the basis of the financial statements. The transformation plan Preparing a transformation plan should be audited by an independent auditor to confirm the accuracy and fairness of the information contained in it.
Notifying shareholders of the company’s intention Notifying shareholders of the company’s intention to to propose voting on a transformation resolution propose voting on a transformation resolution
A notice to shareholders should be made twice – at least one month and then at least two weeks prior to the vote on the Passing the transformation resolution transformation resolution. The notice should contain essential details of the transformation and an independent auditor’s opinion, and should specify where and when shareholders Shareholders declaring their intention to continue as can inspect the full transformation plan with appendices. members of the company post transformation Passing of the transformation resolution by the general meeting Appointing members of the transformed company’s governing bodies The transformation resolution passed by the general meeting must be drawn up as a notarial deed. The resolution requires a qualified majority of at least three-fourths of the votes cast by shareholders representing at least half of the share Signing the articles of association of the new capital, unless the articles of association provide for stricter company requirements in this regard.
Shareholders declaring their intention to continue Filing an application with the National Court Register as members of the company post transformation to record the change of the form of incorporation The company should request the existing shareholders to submit, within one month from the date of the Placing a transformation notice in the official transformation resolution, declarations of their intention to gazette, Monitor Sądowy i Gospodarczy continue as members of the company post transformation, unless such declarations were already made on the date of the transformation resolution. In order to be valid, the declarations must be made in writing. Preparing a transformation plan Next steps Prior to the transformation, the company’s management board must prepare a transformation plan with all the Once the transformation resolution has been passed and relevant appendices. In order to be valid, the transformation declarations submitted by shareholders, the next step is plan must be made in writing (if the company has only one to make appointments to the governing bodies of the shareholder, the plan must be drawn up in the form of new company and to sign its articles of association. The
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 21 Legal framework for IPOs
management board will then apply to the registry court to change the company’s legal form. The management board will also arrange for a transformation notice to be published in Monitor Sądowy i Gospodarczy.
Consequences of transformation
A change of legal form takes effect upon entry of the new company in the National Court Register. The court will simultaneously delete the predecessor company from the register. As a rule, the new company will assume all rights and obligations of its predecessor.
LEGAL BASIS OF SHARE ISSUE
Issue resolution
The general meeting of a company contemplating an IPO must pass certain resolutions concerning the public offering and the seeking of the securities’ admission to trading on a secondary market. These include: nn resolution to issue securities in a public offering; nn resolution to seek admission of securities to trading on a regulated market; nn resolution authorising the management board to enter into an agreement for registration of securities with the CSDP (conversion of shares into securities in book-entry form).
Share capital can be increased within the limits of authorised capital or through a conditional capital increase. A resolution to approve a share capital increase from which new shares will be issued in a public offering may authorise the management or supervisory board of the company to set the final amount of the capital increase, which may not be lower than the minimum amount or higher than the maximum amount determined by the general meeting. A resolution authorising a share capital increase by way of a public offering must be notified to the registry court within 12 months from approval of the prospectus by the PFSA.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 22 IPO preparations – advisers and timetable
23 IPO preparations – advisers and timetable
IPO ADVISERS to provide assurance of professional and diligent execution to investors. An IPO is a complex process that must conform to applicable laws and market practice. It requires thorough legal and Presented below is an overview of the different types of business preparations, and therefore it is vital to assemble advisers involved in a stock market flotation and their roles in a team of advisers with relevant knowledge and experience the process.
Advisers to the issuer/selling shareholder
AUDITOR
MANAGERS PR/IR ADVISER
OFFERING BROKER LEGAL ADVISER
Source: DM PKO BP in-house analysis
The advisers assisting the issuer (or the selling shareholder) on The key roles and responsibilities of an offering broker are to: an IPO typically include the Offering Broker, Managers, Legal Advisers, Auditor, and PR/IR Adviser. Other advisers may also nn file the prospectus with the PFSA on behalf of the issuer; be engaged to prepare technical or industry research reports or perform other tasks if this is required by the nature of the nn set up and make available a sufficient number of customer transaction or the industry in which the issuer operates. service offices where orders can be placed by investors in the IPO; Offering Broker nn accept orders and payments for shares; Article 27 of the Public Offering Act provides that only an investment firm (a brokerage firm, the brokerage arm of nn prepare particular sections of the prospectus, including a bank, a foreign investment firm operating a brokerage a description of the IPO’s terms and conditions; business in Poland, or a foreign legal person domiciled in an OECD or WTO member state operating a brokerage business nn form a syndicate to distribute shares in the retail offering; in Poland) may act in the capacity of an offering broker. nn deal with capital market institutions (WSE, CSDP, PFSA);
nn participate in the preparation of applications to be filed with the WSE, requesting admission of shares to stock market trading and their listing;
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nn cooperate with the company in the process of registering as the offering broker. The breadth and composition of an IPO the shares with the CSDP/converting the securities into syndicate heavily depends on the offering’s size, complexity and book-entry form; geography. The market practice is: nn carry out the IPO settlement. nn for from one to three investment firms to manage transactions with a maximum value of PLN 200m available Managers to investors in Poland only;
In an IPO, the issuer can raise capital from retail investors nn for at least one investment firm with an international (individuals) and institutional investors (mutual and pension presence or relationships with foreign investors to manage funds, etc.), including qualified institutional buyers. In order transactions available to domestic and foreign investors to be successful, an institutional offering has to be handled (outside certain jurisdictions, for instance, the US in the by reputable managers with relevant experience and close case of a Regulation S offering); relationships within the institutional investor community. nn for several global investment firms partnering with reputable An IPO will typically be prepared by managers, including the Polish managers and at least one US-licensed investment global coordinator and the bookrunner (joint bookrunners), firm to manage large transactions available to domestic and who are reputable investment firms (a brokerage firm, foreign investors (including US qualified institutional buyers). a brokerage office, or an investment bank) with relevant experience and close relationships with the investor Legal Adviser community and the broader market. Legal advice on an IPO will typically be provided by The roles and responsibilities of the global coordinator/ a reputable law firm specialising in Polish law and the legal bookrunner include: systems of other countries and organisations (e.g. the EU) that are of relevance to the IPO. nn participating in the prospectus drafting process; The role of the legal adviser is to: nn organising ”early look”, ”pilot fishing” and roadshow meetings in Poland (or in Poland and abroad in the case of nn assist the issuer (or the selling shareholder) and the Regulation S offerings); managers in preparing the prospectus (coordinate the drafting process, revise and update the prospectus); nn placing shares with institutional investors; nn carry out legal due diligence; nn providing advice on pricing strategy for the bookbuilding process and final IPO pricing; nn prepare corporate documents, publicity guidelines, and other relevant documents required under the Commercial nn providing advice in the process of selecting institutional Companies Code and the Public Offering Act. investors eligible to subscribe for shares; The number of law firms involved in an IPO varies depending nn arranging for a research report to be prepared by an on the offering’s size and complexity. Only one legal adviser will analyst hired by the managers. often be hired for smaller transactions. In contrast, large IPOs will typically be handled by at least two law firms – one advising The global coordinator is responsible for coordinating the entire the managers and the other advising the issuer (or the selling IPO process and the roles of individual managers, which often shareholder). In transactions available to foreign investors, foreign overlap. In many cases, one investment firm will perform all or branches of the law firms participating in the IPO will also be some of the roles assigned to the managers, and may also act engaged to provide advice on the laws of relevant jurisdictions.
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Auditor PR/IR Adviser
The IPO auditor is appointed from among independent audit The PR/IR adviser is a marketing agency with experience in firms qualified to audit financial statements. managing public and investor relations and in organising marketing campaigns. As part of its responsibilities in the IPO process, the auditor is required to: The role of the PR/IR adviser is to: nn carry out financial due diligence; nn develop a comprehensive IPO publicity plan compliant with the publicity guidelines in place at the company; nn review selected sections of the prospectus; nn manage media relations and communications (handling nn audit the issuer’s financial statements; media queries and responding to untrue negative media reports on the company, if any); nn review financial disclosures made in the prospectus (the so-called tick-and-tie/circle-up procedures); nn print and distribute the prospectus (typeset, edit and prepare the prospectus for publication). nn prepare comfort letters for the managers to confirm that disclosures made in the prospectus are consistent with the IPO/LISTING TIMETABLE issuer’s financial statements and accounts. Stages of the IPO process Audit and review of a company’s financial statements by an independent auditor provides assurance to investors that An IPO is a multidimensional process requiring appropriate the statements have been prepared correctly (this eliminates preparation. The most important part of the IPO phase the time- and resource-consuming process of assessing the is drafting a prospectus and getting it approved by the financial statements by each investor on their own, which regulator. The purpose of the next phases of the process is would require specialist knowledge on their part in the fields of to attract investors interested in buying shares in the offering financial audit and accounting). Therefore, the role of a large, and to have the shares listed on the Warsaw Stock Exchange. reputable audit firm widely trusted by investors is vital.
Initial public offering by stages
EXECUTION Retail Prospectus Investor Roadshow subscription IPO on IPO preparation approval education + bookbuilding and share + publication the WSE allocation
Approximately 2 weeks Approximately 2 months 2 weeks 1−2 weeks 1−2 weeks 3−5 months from filing with the PFSA from allocation
Source: DM PKO BP in-house analysis
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IPO preparation nn technology, and
IPO preparation begins with the decision to issue shares in nn tax matters. an initial public offering (and in some cases to sell shares by the existing shareholders). The issuer must take appropriate If the due diligence exercise is conducted properly, it helps corporate actions to meet all formal and legal requirements. to identify any matters of relevance in making an investment decision, which must be disclosed in the prospectus. It will Most of these actions are required by law. During the IPO also help to develop a model to value the issuer’s business, phase, the legal basis for the offering must be established. providing important guidance in setting the issue price (or the In other words, an issue resolution must be passed by selling price) of shares offered in the IPO. the company’s general meeting (and a resolution of the management board is also required if new shares are to be For the issuer, due diligence is a vital tool to identify relevant issued within the limit of authorised capital). Such resolution risk factors. Their disclosure in the prospectus serves as must specify all relevant details of the offering, as well as confirmation and evidence for the issuer that investors authorise conversion of the shares into securities in book- understood and accepted the risks at the time of placing entry form and their admission to stock exchange trading. orders for shares.
One of the very first steps the issuer needs to take at this By floating shares on the stock exchange, a company stage is to appoint professional advisers to assist the company becomes a listed public company (the relevant legislation with the IPO. The key focus for the company and its advisers defines a public company as a company having at least will now be to prepare a prospectus, which will be subject one share in uncertificated (book-entry) form1). Once the to review and approval by the PFSA. The prospectus may decision to go public has been made, the issuer should start be a single document or a set of documents comprising to make preparations that will enable it to comply with the a registration document, a securities note, and a summary requirements applicable to public and listed companies. document. In order to ensure appropriate transparency and equal The issuer is one of the process participants responsible for access to information for investors, the company will have the information contained in the prospectus − and as such is to comply with the disclosure requirements stipulated by required by law to ensure the information is true, accurate, the Public Offering Act, the Act on Trading in Financial and complete. The need to comply with this requirement is Instruments, MAR, and other applicable laws. In particular, one of the reasons why the advisers undertake due diligence it will be required to publish current and periodic reports. of the issuer’s and its group’s business. The scope of the To that end, the issuer will need to put in place appropriate exercise typically covers communication facilities, adding a properly designed investor relations page to its website and applying to the PFSA for an nn legal; account in the Electronic Communications System (ESPI). nn financial; As early as at the IPO stage, the issuer should also define corporate governance rules it will be prepared to comply with nn business; as a listed company, as prescribed by the Code of Best Practice for WSE Listed Companies, and other relevant nn environmental; documents.2
1 Article 4.20 of the Public Offering Act 2 For more information on the Code of Best Practice for WSE Listed Companies, see section Corporate Governance – le savoir vivre for public companies of this guide.
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The management team must be well prepared to manage the a particularly complex financial history of the issuer or other company post flotation, as their decisions and performance factors). Prospectus approval is granted by the PFSA by way will now be judged by a special type of audience − equity of a formal decision. analysts and investors. The management board will be accountable for successful delivery of the corporate strategy The issuer must promptly publish the prospectus on its and long-term value growth. In particular, the board will be website and through other channels. the principal body representing the company in dialogue with the market. Roadshow
Investor education A management roadshow is a series of meetings held by the issuer’s management with institutional investors to present Investor education serves to educate institutional investors the company and generate interest in the IPO. about the company, its business model and market environment, and to gauge their preliminary interest in the Bookbuilding proposed IPO. Involved in the process is an independent equity analyst responsible for writing a research report on the The bookbuilding process is carried out by the bookrunner company. to gauge institutional demand for the company shares. The overall purpose of the exercise is to optimise the issue price The report will include the company’s valuation prepared on and the final offering size with a view to maximising issue the basis of an analysis of the company, its business, and proceeds at given market conditions and investor demand. market environment. It will present the analyst’s views on the company and its prospects, facilitating decision-making Retail subscription by investors. A research report is typically intended for institutional investors who are clients of the investment firm Retail investors may place orders at customer service offices behind the report. set up by the offering broker (and other members of the distribution syndicate if one has been formed), within the Employed by one of the IPO advisers yet separated by timeframe specified in the prospectus, and in line with the ”Chinese Walls”, the analyst will work independently of rules in place at the investment firm taking the orders. Orders the IPO managers and other parties involved in the IPO must be placed on order forms available at the customer preparation. service offices. At the time of placing an order for shares, investors are required to make the full payment of the share Prospectus approval and publication price.
A prospectus is subject to approval by the Polish Financial Depending on the transaction structure agreed by the issuer Supervision Authority. Pursuant to Article 33 of the Public and the offering broker, in some cases retail investors may Offering Act, the PFSA is to issue a relevant prospectus place orders for shares during the bookbuilding process, decision within 20 business days from the filing of an before the final price has been set. In such a case, retail application by an issuer contemplating an IPO. However, investors will only know the top end of the price range this timeframe is a guideline only, and in practice the and will have the right to opt out and avoid the legal approval process takes up to two months. The length of the consequences of having placed their orders within two days process will vary depending on the time it takes to complete from the announcement of the final issue price. any related investigations (which may be lengthy due to
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Otherwise, retail investors may place orders only after the institutional bookbuilding process has been completed, knowing the final issue price at the time of placing their orders.
Share allocation
As a rule, shares are allocated by the company’s management, with technicalities handled by the offering broker. Market practice is for retail allocations to be made pro rata to orders placed and institutional allocations to be made on a discretionary basis.
IPO on the WSE
When seeking a listing of its shares on the Warsaw Stock Exchange, an issuer must file an application to have the shares registered in the system operated by the CSDP. Once the CSDP has passed a resolution authorising entry of the issuer’s shares in the system, the offering broker and other parties taking orders for the shares will record the shares allocated to investors in their respective accounts.
The issuer must also apply for admission of its shares to trading on the WSE. If the issuer has met the requirements stipulated in the applicable laws and the WSE Rules, then the WSE Management Board – having reviewed the issuer’s listing application – will pass a resolution to admit the issuer’s shares to stock exchange trading and set the first listing date.
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30 IPO preparation – prospectus
PROSPECTUS – THE LEGAL ASPECTS the company’s business, as well as to lay the foundation for further work. A prospectus must be prepared in line with all applicable EU legislation by an experienced team of advisers comprising A due diligence is carried out both in connection with a brokerage firm, a legal adviser and an auditor. Such the company valuation and share pricing process and advisers should carry out procedures to ensure that the documentary preparation process. It involves both their respective sections of the prospectus are prepared a documentary review as well as discussions with company with the required due care and diligence in line with the representatives (on strategy, risk management, corporate requirements set forth in Commission Regulation No. governance and other matters) and auditors (on procedures 809/2004 of 29 April 2004 implementing Directive 2003/71/ for preparing financial statements). If justified, a due diligence EC of the European Parliament and of the Council as will also cover the company’s largest customers and suppliers. regards information contained in prospectuses, as well as For specialist companies, it may be necessary to hire third-party the format, incorporation by reference and publication of experts, for instance, persons competent to evaluate mineral such prospectuses and the dissemination of advertisements resources or real estate appraisers. (”Regulation 809”). This will not only facilitate the smooth execution of the IPO process, but will mitigate potential The due diligence process will typically focus on the following liability of the offering participants. aspects of the company’s business: the legal status of the companies making up the group and the group’s organisational Due diligence structure (including corporate governance matters); market environment; operating processes; strategy; relations with key customers, suppliers and creditors; material contracts and As an essential part of IPO agreements; major investment projects; risk management; real estate and other property, plant and equipment; environmental preparation, the issuer’s matters; industrial relations; major shareholders; litigation, administrative, regulatory and out-of-court proceedings; financial, business and legal related-party transactions; permits; accounting matters; financial statements; auditor relations; intellectual property; affairs will be investigated and insurance. in a process referred to as A data room set up for the purpose of the due diligence should provide access to all required corporate and legal documents a due diligence. specified in the request lists supplied by the banks and legal advisers. It facilitates the due diligence process for bankers and The due diligence process involves an objective assessment lawyers and is used in drafting the prospectus. of the company’s business to ensure that the information and facts contained in the prospectus are true, accurate and Before the offering is completed (at pricing and again on complete and can be relied upon by investors when making an the date of the settlement of the offering), all participants investment decision. The due diligence process also identifies in an IPO hold a bringdown conference call to discuss any the risks inherent in the issuer’s business that must be properly material changes affecting the company’s business, financial disclosed in the prospectus. performance or other aspects that may have occurred since prior sessions and decide whether any additional information Due diligence procedures are adapted on a case-by-case basis should be disclosed in the offering document. The due to fit the type of company and its group, with no standards diligence continues throughout the prospectus validity period, or rules set in stone. A due diligence usually begins with and during this time the prospectus may require updating to a management presentation for the offering participants to reflect any material factors which might affect the assessment make sure that all of the advisers understand every aspect of of the offered securities by investors.
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Prospectus Article 22 of the Public Offering Act provides that a prospectus must contain information material to the A prospectus must be prepared, approved by the PFSA and assessment of the issuer’s trading and financial position, published before an initial public offering can be launched. its assets and growth prospects, and that the information A prospectus is the principal document forming the basis of an must be true, accurate, complete and relevant to the type IPO and the key source of information on the company and the of issuer and the securities to be offered in a public offering offered securities. or admitted to trading on a regulated market. Furthermore, a prospectus should convey information in a language The drafting of a prospectus usually takes between several understandable to investors and in a manner enabling weeks to a couple of months. Due diligence findings and investors to make an informed assessment of the issuer. information obtained during drafting sessions held between the company and its advisers are used as input. The information set out in a prospectus is organised into schedules and building blocks. Schedules are sets of minimum disclosure requirements appropriate to the type of issuer and securities involved. Building blocks are additional disclosure requirements to be added to relevant schedules depending on Article 25 of the Public the type of issuer. Regulation 809 provides for combinations of schedules and building blocks for various transaction types, Offering Act defines including an initial public offering. the detailed scope of A prospectus may be drawn up as a single document or as a set of documents comprising a registration document, a prospectus and refers to a securities note and a summary document. The choice of format rests with the issuer. Both formats convey the same Regulation 809, stating that information but are differently organised. A three-part prospectus clearly segregates information relating to the a prospectus should contain issuer and the proposed IPO. all of the information The table below provides a summary of the key sections of necessary to make an a prospectus. informed assessment of the company’s economic and financial position and its growth prospects.
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Prospectus contents
SUMMARY nn conveys in a non-technical language the key characteristics of, and risks associated with, the company and its securities
nn provides a summary of key prospectus contents, including an overview of the company, its business, strategy and prospects, along with a summary of its financial position, risk factors and the key characteristics of the planned offering
RISK FACTORS nn describes the principal risks associated with the company, its industry and the equity offering to which the prospectus pertains
nn typically covers risks relevant to the company’s and its group’s business, including macroeconomic risks, risks inherent in the group’s market environment, regulatory risks, and risks related to ownership structure, the planned offering and investment in the shares
BUSINESS OVERVIEW nn describes the key characteristics of the issuer’s core business and operations, and provides a summary of the principal products and services sold by the issuer for each year covered by historical financial information
nn describes the key markets on which the issuer and its group operate (this may be organised into a separate sub-section). This section will often include information on employees, research and development, the group’s competitors, and the legal and regulatory framework in which the group operates
OPERATING AND FINANCIAL nn describes changes in the issuer’s financial position and results of operations for each REVIEW AND CAPITAL year and any interim period covered by the required historical financial information. This RESOURCES section will also include a description of important trends in the financial information contained in the prospectus that is necessary to understand and assess the issuer’s business as a whole
nn the review of the issuer’s financial performance will include material factors, including extraordinary or one-off events, or new developments, that have a material effect on its results of operations, including the extent of their effect on such results
nn this section must also explain the key drivers of any changes in net sales/net revenue disclosed in the financial statements, as well as provide information on the government’s economic, fiscal and monetary policies and political or other factors which have had or could have a direct or indirect impact on the issuer’s operations
nn this section will often discuss trends influencing the issuer’s performance
nn it will also provide an overview of the issuer’s capital resources (sources of long and short-term liquidity), borrowing requirements and funding structure
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FINANCIAL INFORMATION nn contains financial statements for the last three financial years (the financial statements for the last two years should be prepared in accordance with the financial reporting standards which the issuer will apply in the preparation of the next financial statements mandated by the reporting requirements). Where financial statements have been restated to ensure compliance with the applied financial reporting standards, the issuer must have the restated financial statements audited by external auditors
nn a prospectus may have to include pro forma financial statements if the issuer has completed or is contemplating a material transaction, or if it has a complex financial history.
Financial information disclosure requirements that apply to prospectuses are covered in more detail in the section Financial reporting in a public offering.
OTHER INFORMATION nn dividend policy
nn material agreements/contracts and litigation
nn management and senior executives
nn related-party transactions
nn major shareholders
nn terms and conditions of the offering
A prospectus must also contain representations by persons to publish the supplement immediately after it is approved by responsible for the prospectus stating that to the best of the PFSA. their knowledge and after having taken all reasonable care to ensure such is the case, the information contained in Any information regarding the organisation or the process the prospectus is reliable, in accordance with the facts and of subscribing for or selling securities or their admission to contains no omission likely to affect its import. trading on a regulated market which alters the contents of a prospectus or a supplement that has already been The issuer is required to notify the PFSA of any material released but which is not itself a supplement, as defined errors or misstatements discovered in the prospectus or of above, may be published by the issuer without the need to any material factors of relevance to the assessment of the obtain the approval of the PFSA in the form of an update securities involved that have occurred or been brought to announcement. the issuer’s or the selling shareholder’s attention after the prospectus approval date and before the prospectus expiry The validity period of a prospectus is 12 months from its date. Such notification should take the form of a supplement publication, as set by the Public Offering Act. However, if any to the prospectus and should be filed promptly after circumstances arise that affect the contents of a prospectus a reportable event has taken place or has been brought to the before it expires, the issuer is required to update the issuer’s or the selling shareholder’s attention. prospectus in the form of a supplement. A supplement will be approved by the PFSA within seven days of filing a relevant The PFSA has seven business days from the filing of a relevant application. A prospectus expires at the end of the day when application to approve the supplement. The issuer is required the securities offered in an IPO are allocated to investors or
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the day when all of the securities covered by the prospectus to trading on a regulated market or the seeking of such are admitted to trading on a regulated market, whichever admission will rest with: occurs later. • the issuer; ADMINISTRATIVE PROCEDURES • the selling shareholder; Proceedings before the Polish Financial Supervision Authority • a firm commitment underwriter;
In order to have a prospectus approved, the issuer or the • entities which prepared, or participated in the preparation selling shareholder must submit to the PFSA – through an of such information, unless these entities or persons for investment firm – the relevant application along with the whom they are responsible are not at fault; and prospectus. The following documents should be enclosed with the application: the prospectus; the articles of • persons who use such information in their activities association or an equivalent document describing the issuer’s pertaining to trade in financial instruments, unless they were business objects and organisational structure, as required by not and could not have been aware of such information the laws of the issuer’s domicile; the deed of incorporation or being untrue or omitted. an equivalent document confirming the issuer’s incorporation in accordance with the laws of the issuer’s domicile if it was The liability of the persons referred to above is joint and incorporated less than five years before the application date; several and may not be limited or excluded. This, however, relevant resolutions of the issuer’s governing bodies; the does not prejudice the possibility of concluding an agreement list of information which the issuer requests to be withheld which would govern the mutual obligations of these persons from disclosure in the prospectus, along with reasons for under such liability. such request; and the list of information which cannot be included in the prospectus. The fact that a prospectus has Criminal liability (Art. 100 of the Public Offering been submitted is publicly disclosed by the PFSA. The decision Act) on the approval of a prospectus in connection with an initial public offering must be issued by the PFSA within 20 business Persons responsible for the information contained in days of the application date, with the proviso that days on a prospectus or other informational documents, or other which the company and its advisers were amending the information connected with a public offering, or the prospectus to take account of any comments or questions admission or seeking of admission of financial instruments raised by the PFSA do not count towards that deadline. to trading on a regulated market who deliver untrue data or A prospectus in the form of three separate documents suppress true data materially affecting the meaning of such will only become valid upon the PFSA’s approval of all its information are liable to a fine of up to PLN 5m or a penalty constituent parts. It is important to note that a prospectus of imprisonment for six months to five years, or to both of must be updated while the proceedings are pending to these penalties jointly. ensure that it is true and complete as of the date of approval. Persons who commit an act specified above while acting on LIABILITY behalf or in the interest of a legal person or unincorporated organisation are subject to the same penalty. Civil liability (Art. 98 of the Public Offering Act)
Liability for any damage caused by the disclosure to the public of untrue information or by the omission of information which should be disclosed in documents prepared in connection with a public offering of securities, their admission
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36 Financial reporting in a public offering
One of the key stages in the run-up to a public offering the issuer has no obligation to additionally include its and flotation is the preparation of appropriate financial separate financial statements. information. Financial reporting is also one of the main areas where a prospective issuer has to comply with the Financial statements for at least the last two fiscal years requirements of the public capital market quite early on in the must be consistent in form with the next annual financial IPO process. For most companies, it poses a major challenge statements to be published by the issuer: in the case of involving a huge amount of work, not only by its accounting consolidated financial statements, the issuer is mandated to and finance staff. apply International Financial Reporting Standards (”IFRS”), whereas in the case of separate financial statements – it can Financial information presented in a prospectus is of key choose between: interest to investors, being relied upon by many of them as a basis for investment decisions. Hence the wide scope nn IFRS; or of the required financial disclosures. In addition to audited financial statements, a large number of additional disclosures nn provisions of the Accountancy Act and the Minister of is required to provide an insight into the issuer’s historical and Finance’s Regulation of October 18th 2005.5 current financial performance as well as its financial standing. In practice, an issuer having subsidiaries will typically Presented below is a summary of the key requirements related prepare a single set of IFRS-compliant consolidated financial to the preparation of financial information for the purpose of statements covering the last three fiscal years, with an a prospectus. auditor’s opinion covering all the three years.
FINANCIAL STATEMENTS It should be noted, though, that even if a prospectus contains financial statements prepared in accordance with the Polish Historical financial information accounting standards (an option available only to issuers which do not have any consolidated subsidiries), it is not A prospectus must include the issuer’s financial statements for possible to use the issuer’s existing ”statutory” financial the last three financial years (or for two years – in the case of statements for that purpose, because financial statements SMEs ), complete with the auditor’s opinions. The most recent prepared for inclusion in a prospectus must also comply audited annual financial statements included in a prospectus with the requirements stipulated in the Minister of Finance’s may not be older than 15 months (the period may be Regulation of October 18th 2005, i.e. they must contain extended to 18 months if audited interim financial statements significant additional disclosures. for a period of at least six months are included, but – in view of the key relevance of annual accounts – this option is very Financial statements included in a prospectus do not have rarely chosen). to constitute the ”statutory” accounts, although as soon as the issuer’s general meeting resolves to seek admission of Where an issuer has subsidiaries and prepares consolidated the company’s securities to trading on a regulated market, financial statements, its prospectus must contain such transition to IFRS is possible for keeping the company’s consolidated financial statements. If this is the case, however, accounts and preparing its ”statutory” financial statements.
3 Small and medium-sized enterprises meeting at least two of the following three criteria: average headcount in a financial year below 250, total assets below EUR 43m, and full-year net revenue below EUR 50m. 4 Polish Accountancy Act of September 29th 1994 (Dz.U. of 2013, item 330, as amended). 5 Regulation of the Polish Minister of Finance on the scope of information to be disclosed in financial statements and consolidated financial statements required to be included in prospectuses of issuers domiciled in Poland to whom the Polish accounting standards apply, dated October 18th 2005 (Dz.U. No. 209, item 1743, as amended).
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Interim financial information In accordance with the applicable regulations, pro forma financial information has to be included in a prospectus if A prospectus must contain the issuer’s interim financial such a transaction would result in a change of a key metric statements for at least the first six months of a given financial reflecting the scale of the issuer’s business (e.g. profit, revenue, year if nine months or more have passed between the or total assets) by at least 25% (this represents a “significant reporting date of its most recent audited annual financial gross change”). Pro forma financial information is subject to statements and the prospectus date, albeit – in view of a verification by an auditor, whose report is also to be included investors’ expectations – that period is usually shorter in in the prospectus. Such information usually comprises a pro practice. In the light of the applicable regulations, such forma balance sheet and statement of profit or loss, as well as interim accounts do not have to be reviewed or audited, concise explanatory notes. but in practice an auditor’s review is usually performed. Also, interim financial statements should be consistent COMPLEX FINANCIAL HISTORY in form with the annual financial statements (prepared consistently on a consolidated or separate basis, based on An issuer who completed a business reorganisation or the same accounting standards), although they may be (and significant business acquisitions/divestments during the IPO in fact almost always are) prepared in a condensed form (in year or within the three preceding years may have to satisfy accordance with IAS 34 – where IFRSs are applied). additional requirements in preparing financial information for the purpose of its prospectus. As a general rule, the While SMEs are not required to include their interim financial historical financial information should cover the issuer’s statements in the prospectus, in practice they will often need entire organised business. In a situation where inclusion in to do so to meet investors’ expectations. a prospectus of the company’s financial statements would not satisfy that requirement, then – in accordance with Furthermore, if the issuer has already released interim the applicable regulations – we are dealing with a complex financial statements covering a period subsequent to the financial history. reporting date of its most recent annual financial statements, such interim financial statements should be included in the Example: prospectus irrespective of the requirements discussed above. An issuer is planning to go public and list its shares in the In addition to the minimum requirement to include its second quarter of 2017. Pursuant to Regulation No. 809/2004, interim financial statements after the lapse of the said nine- it intends to disclose historical financial information for the last month period, the issuer must in practice also reckon with three years (2014, 2015, 2016). Within the last three years the expectations of the offering broker (a brokerage firm or the issuer completed business acquisitions – in mid-2015 it investment bank) and investors to include its interim (quarterly) acquired company A, and in mid-2016 – company B. It also information if more than three or four months have passed made a significant financial commitment – if the offering is since the end of the relevant quarter. It is a good practice to successful, it will acquire company C. Each of companies A, have such financial statements reviewed by an auditor. B and C is significant relative to the issuer’s size (meets the significant gross change criterion). PRO FORMA FINANCIAL INFORMATION The issuer may not limit the scope of the required disclosures Pro forma financial information illustrates how actual or to its own financial statements for 2014-2016, as they do not proposed transactions might have affected financial data provide a complete picture of the financial history of its entire disclosed in the financial statements included in a prospectus organised business for that period. In the model solution, the if such transactions had taken place earlier. Such transactions issuer should additionally disclose: may include acquisitions of other businesses or business reorganisations, but also material transactions in respect of nn financial information of company A for the period from which the company has already made significant commitments. January 1st 2014 to the acquisition date;
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 38 Financial reporting in a public offering
nn financial information of company B for the period from The issuer should also disclose the effect of the transactions January 1st 2014 to the acquisition date; completed in 2016 and planned acquisitions by preparing: nn financial information of company C for 2014–2016. nn a pro forma statement of profit or loss for 2016 (without comparative data) assuming that the acquisition of In practice, other solutions are also an option, but their companies B and C had taken place at the beginning of admissibility should be thoroughly analysed in the light of all 2016; relevant considerations and agreed upon with the regulator (the Polish Financial Supervision Authority). nn a pro forma balance sheet as at December 31st 2016 assuming that the offering and acquisition of company C had taken place at that time.
ISSUER Issuer’s history
COMPANY A
COMPANY B Significant financial commitments COMPANY C PRO FORMA Balance sheet FINANCIAL + Statement of profit or loss INFORMATION 2014 2015 2016
Source: PwC in-house analysis
PROFIT FORECASTS OR ESTIMATES Finally, a profit forecast should be presented in a manner ensuring its comparability with historical financial information Inclusion of a profit forecast in a prospectus is optional (unless and must be accompanied by a relevant auditor’s report. the company has published profit forecast which remains valid – then its inclusion in the prospectus is obligatory). It should be noted that the term ”profit forecast” in the However, a number of regulatory requirements are imposed light of prospectus regulations refers almost exclusively to on a company opting for disclosure of such information. projected profitability metrics (such as profit before tax, operating profit, or EBITDA). Information on the expected Firstly, a profit forecast should be prepared on the basis of level of sales, capital expenditure and many other categories actual strategies and plans, as well as an in-depth analysis. reflecting the company’s future or potential standing and trends – within the meaning of the applicable regulations Secondly, it should be accompanied by a description of all – does not constitute a profit forecast (unless future profits material underlying assumptions, with a clear indication can be easily inferred on its basis). At the same time, which of them relate to factors over which the management the definition of ”profit forecast” is formulated in such has any degree of control, and factors that are completely a way that even certain verbal statements (e.g. ”in the beyond its control. Such assumptions should be specific, management’s opinion, the current year’s profit will represent precise and understandable to investors. an improvement year on year”) constitute a profit forecast, subject to the requirements described above.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 39 Financial reporting in a public offering
Usually, a profit forecast covers the period of 12 months STATEMENT OF CAPITALISATION AND subsequent to the reporting date of the most recent annual INDEBTEDNESS financial statements (i.e. the period partly elapsed at the time when the forecast is being prepared), as longer-term Information disclosed in a statement of capitalisation and forecasting may be impracticable. The number of variables indebtedness (split into guaranteed and non-guaranteed, and uncertainties bearing on a more remote future period secured and unsecured, as well as indirect and contingent would largely deprive such forecast of reliability, entailing debt) may not be older than 90 days. a considerable risk that actual performance might widely differ from the projections, which could undermine the If any such information is older than 90 days and a significant market’s trust in the management. change has occurred after the most recent reporting date, the issuer should include additional information updating such Similar requirements apply to profit estimates (which are rare figures. in practice). Unlike forecasts, they relate to a period which has come to an end but for which financial statements are not yet WORKING CAPITAL STATEMENT available (have not been included in the prospectus). A prospectus should include the issuer’s statement to the SELECTED FINANCIAL INFORMATION effect that, in its opinion, it has sufficient working capital to meet its current needs (at least for 12 months from the A prospectus should contain selected financial information prospectus date), and if this is not the case – a proposal for the relevant annual and interim periods. Such information of how the working capital can be supplemented. Such constitutes a summary of key financial data analysed by the statement must be supported by appropriate documents management, intended to help investors quickly understand prepared by the management (e.g. detailed budgets), which, the issuer’s financial standing and results. Under certain however, are not published. conditions, selected financial information may include alternative performance measures (e.g. EBITDA). STATEMENT OF SIGNIFICANT CHANGES
OPERATING AND FINANCIAL REVIEW A prospectus must also contain a description of all material changes in the issuer’s financial or trading position which An operating and financial review includes information have taken place since the end of the most recent period for on the issuer’s development, results of operations and which audited financial statements have been published. financial standing with a description of main areas of risk and uncertainty. It is presented for all full-year and interim UNAUDITED FINANCIAL INFORMATION periods covered by the financial statements included in the prospectus. Any financial data not taken from audited financial statements should be labelled as unaudited, with its source INFORMATION ON CAPITAL RESOURCES clearly identified.
Information on capital resources includes information on the AUDITOR’S ROLE issuer’s capital resources and any restrictions on their use, as well as an overview of the issuer’s financing policy and cash The auditor plays a key role in the preparation of flows for the periods covered by the financial statements. a prospectus, ensuring the reliability and quality of financial information, a prerequisite for the public offering’s success. In the case of SMEs, the scope of the required disclosures is less extensive. In addition to issuing the above-mentioned opinions and reports for the purpose of the prospectus, the auditor is also required, under applicable standards, to read the
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 40 Financial reporting in a public offering
prospectus in full, verify its contents for compliance with the financial statements it has audited or reviewed, and present pertinent comments. In the process of preparing a prospectus, the auditor often assists the issuer and the offering broker (a brokerage firm or investment bank) in the due diligence by issuing comfort letters. Their use in Poland is gradually becoming a market standard, as more and more entities acting in the capacity of offering brokers implement globally recognised standards. In a comfort letter, the auditor confirms the consistency of data in the financial statements with financial data disclosed elsewhere in the prospectus. In addition, such letter describes the procedures performed by the auditor to verify the issuer’s statement of significant changes in its financial position which have taken place between the most recent reporting date and the prospectus date. A comfort letter is given to assure the offering broker that the financial data was prepared and included in the prospectus with due professional care.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 41 Corporate Governance – le savoir vivre for public companies
42 Corporate Governance – le savoir vivre for public companies
Companies whose shares are admitted to trading on the Corporate governance principles facilitate effective business Main Market of the Warsaw Stock Exchange should apply the management, supervision of public companies, and corporate governance principles promulgated by the WSE. transparent communication with investors. They are also complementary to the applicable laws as they help ensure that the rights of investors are respected. A number of The rules of corporate those rules were adopted in response to actual cases of intentional abuse of powers by corporate bodies or limitation governance are by no of shareholders’ rights where existing legislation failed to provide adequate protection. The Code of Best Practice fills means legal regulations certain gaps in the corporate law, but its primary objective is to promulgate ”soft” rules of conduct which would otherwise – they form a code be difficult to impose in the form of legal regulations. of conduct for listed Focusing more on the spirit than on the letter of the law, the Code of Best Practice is intentionally worded ”soft”. companies, drawn up by However, some concepts used in the Code are defined very precisely. For instance, with respect to related-party practitioners in the field. transactions, the Code adopts a definition of a related party taken from Regulation (EC) No. 1606/2002 on the application The WSE initiated work on the Code and has since of international accounting standards. actively promoted its application, being aware of the clear relationship between the quality of listed companies and TO APPLY OR NOT TO APPLY? the attractiveness of the Polish capital market to investors. The Code is updated on a regular basis so as to meet the Application of the Code of Best Practice is not mandatory. As current needs of listed companies, take account of the for detailed principles, the ”comply or explain” rule has been capital market’s evolving environment and emergence of adopted; namely, the company is free to decide whether to new technologies, or respond to new problems in business apply a given principle or not. In the latter case, it is under the management as they arise. The first-ever set of corporate obligation to publish that information, explaining the reasons governance principles was adopted by the WSE in 2002. The and circumstances for the non-compliance. Such explanation current version of best practices was published in 2016 as the must be exhaustive enough to enable investors to make an Code of Best Practice for WSE Listed Companies 2016, and informed assessment of the associated risks. is often referred to as the Code of Best Practice or Corporate Governance Principles. A decision not to apply the principles of the Code of Best Practice entails no direct negative consequences for the WHY DO COMPANIES NEED CORPORATE company. However, it may be expected that investors will GOVERNANCE PRINCIPLES ANYWAY? consider investment in such a company more risky, which may have a negative bearing on its stock price. The Code of Best Practice is a set of savoir vivre rules for public companies – a collection of codified best practices Most companies seeking admission of their stock to trading of public companies, their governing bodies, investors, and on the WSE recognize the benefits of complying with other stakeholders. And just like the rules of savoir vivre, the the Code of Best Practice and strive to apply all principles Code of Best Practice makes the life of public companies contained therein, or at least as many of them as possible. easier, introduce order into their operations, and enhance As the company prepares for the IPO, it reviews internal their good corporate image. regulations and processes for compliance with the Code of Best Practice. To that end, the company may need to amend its articles of association or other internal regulations
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 43 Corporate Governance – le savoir vivre for public companies
(e.g. introduce the requirement to obtain the supervisory II. Management Board, Supervisory Board board’s approval for any related party transaction), prepare new regulations (e.g. adopt new rules of procedure for the Competences of the management and supervisory boards general meeting, allowing the participation of a large number are precisely defined in the Commercial Companies Code of shareholders), or change composition of its governing or, in the case of foreign companies, in applicable laws of bodies (e.g. appoint new independent supervisory board their respective home jurisdictions. To those detailed legal members). provisions, the Code of Best Practice adds general guidelines on the role of management and supervisory boards. DETAILED CORPORATE GOVERNANCE PRINCIPLES Management board members should act in the company’s best interest and should be accountable for their actions. The Code of Best Practice 2016 is a set of several dozen The management board manages the company’s business, recommendations and detailed principles grouped into six implements its strategic objectives, and ensures efficiency and chapters corresponding to the areas of major importance for safety of its operations. public company’s corporate governance: Disclosure Policy, Investor Communications; Management Board, Supervisory Oversight of the company’s activities is to be exercised by an Board; Internal Systems and Functions; General Meeting, effective and competent supervisory board, also comprising Shareholder Relations; Conflict of Interest, Related-Party independent members. Supervisory board members act in the Transactions; and Remuneration. company’s interest and follow their independent opinions and judgement. In particular, the supervisory board issues opinions Each chapter is divided into three sections. Introduction on the company’s strategy and evaluates the company’s outlines the objective which should be attained by performance. The supervisory board is also expected to review applying a given group of principles. Recommendations the work of the management board in its pursuit of the are recommended measures to be taken by a company in company’s strategic objectives. Findings from such reviews a given area. Every year, listed companies disclose information are presented in reports submitted annually to the general on the application of recommendations in their annual meeting. reports; however, they are under no obligation to publish information on each instance of non-compliance. And finally, Although provisions of the Code are not legally binding and detailed principles are solid instructions to be followed by there are no sanctions for their breach, the way the Code the company; if they are not followed, the company should defines the role of the management and supervisory boards disclose each instance of non-compliance. may affect the assessment of whether such members have properly discharged their duties and whether they may be I. Disclosure Policy, Investor Communications held responsible on that account.
The first group of principles describes the framework of good III. Internal Systems and Functions conduct in communication between the company and its shareholders, potential investors and analysts. Public companies Under the Code of Best Practice, listed companies should should pursue a transparent and effective disclosure policy maintain efficient internal control, risk management and by ensuring easy and non-discriminatory access to company compliance systems adequate to the size of the company, its information. Nowadays, the Internet makes it easy to comply industry and breadth of its business. In addition, a separate with this principle. The current version of the Code of Best independent internal audit function plays an important role Practice emphasizes the role of the corporate website and lists in evaluating the performance of the company’s internal 21 categories of information which should be published on systems. the company’s general-access website. The corporate website should play a central role in shareholder communication and the company’s disclosure policy.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 44 Corporate Governance – le savoir vivre for public companies
IV. General Meeting, Shareholder Relations COMPLIANCE DISCLOSURES
Listed companies should encourage meaningful engagement Although no sanctions are imposed for non-compliance with of shareholders in matters of the company, in particular the Code of Best Practice, there are sanctions for the failure through active participation in general meetings. The Code to disclose non-compliance. Therefore, a company is under no of Best Practice recommends that general meetings be obligation to apply the corporate governance principles, but is organised in such a manner as to allow the largest possible obliged to disclose its decision not to apply them. number of shareholders to participate, including through electronic means of communication. During a general In a prospectus drawn up in connection with an IPO or first meeting, all shareholders should be allowed to fully exercise listing, a company must specify whether it intends to comply their right to participate in the meeting, obtain information with the corporate governance principles. After going public, about the company, and propose draft resolutions. However, listed companies include such disclosures in their annual the exercise of shareholders’ rights should not obstruct reports and on their corporate websites. A decision not to the functioning of the company’s governing bodies. All comply with detailed corporate governance principles must resolutions should be not only formally correct but should be explained on a case-by-case basis, in accordance with the also not violate justified interests of different groups of ”comply or explain” rule. stakeholders or the company itself. Moreover, a company must, without delay, disclose any V. Conflict of Interest, Related-Party Transactions permanent or incidental breach of detailed corporate governance principles if the company had previously declared A company should have in place procedures for preventing that such principles would be complied with. Non-compliance conflicts of interest and for entering into related-party reports are submitted via the WSE EBI system and should also transactions. Individual shareholders should be given no be published on the corporate website. preference in transactions with the company. Agreements with major shareholders should be approved by the supervisory board and analysed from the perspective of the Information on company’s interests. non-application of VI. Remuneration corporate governance A company should have in place a policy of remunerating members of its governing bodies and key managers. The principles is publicly amount of remuneration should be adequate to the scope of responsibilities of each member of the company’s governing available and is taken into bodies and tied to its strategy, goals, interests, and results of operations. Remuneration paid under incentive schemes account by prospective to the company’s management board members and key managers should be tied to the company’s long-term financial investors. performance and creation of long-term shareholder value. Information about the company’s remuneration policy and A company with an ambition of being an attractive target other benefits actually paid to each management board for investors and fully tapping the opportunities afforded member should be published in the company’s annual report. by the listed company status should seek to apply corporate governance principles to the greatest possible extent.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 45 Premarketing, marketing and subscription
46 Premarketing, marketing and subscription
PREMARKETING AND MARKETING OF THE In Poland, the IPO marketing strategy is relatively uniform; OFFERING however, certain elements are often tailored to the issuer’s profile and needs. As a rule, the marketing stage lasts around The IPO marketing process may be broken down into two 3–4 weeks in total, but the length of the period may change principal stages: depending on the actual market conditions as well as the size and structure of the IPO. 1) investor education, or premarketing, conducted by analysts to present the research report about the company and its The key objective of the marketing stage is to inform and offering (analyst research) to potential investors prior to educate as many prospective investors as possible about the publication of the prospectus; company’s business, in order to maximise investor demand and the final IPO price. 2) roadshow by the management board, being the key marketing phase following publication of the prospectus. These marketing activities are targeted primarily at institutional investors, as they play the key role in every Optionally, the IPO process may also involve ”pilot fishing”, successful transaction. However, some of the activities will which is usually conducted prior to the filing of the also cover retail investors. prospectus with the PFSA in order to probe, on a purely preliminary basis, the degree of investor interest in the IPO, and to fine-tune the equity story.
Marketing process flow
Investor education Roadshow (premarketing) (+ bookbuilding)
approximately 2 weeks approximately 2 weeks
Source: BZ WBK in-house analysis
Pilot fishing Meetings with the company’s management are held to introduce the company to investors on a purely preliminary Pilot fishing or early look are optional elements of the basis, without disclosing any information on the planned marketing process, and are undertaken usually if the transaction. company which intends to go public represents a sector largely unknown to investors. Pilot fishing meetings may be Objectives: organised in several rounds for a number of selected investors active on the IPO market, as necessary. One round usually nn preliminary presentation of the company to investors; includes 5–6 meetings and is organised prior to or shortly after the prospectus filing in order to probe investor interest nn collecting feedback from investors on their general in the IPO at an early stage and to fine-tune the equity perception of the company and the IPO (if any), which story, or just before the IPO in order to verify the optimum could be useful in fine-tuning the equity story and deciding transaction window. whether to proceed with the project or to put it on hold.
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Expected outcome: Objectives: nn preliminary look at feasibility of the planned transaction, nn in-depth investor education on the company’s business; including investors’ views on the sector, potential interest in the IPO, identification of key risks, and optimum time nn communication of the equity story highlights and the schedule; company’s key value drivers; nn preliminary feedback on the company’s stock price; nn probing the potential investor interest in the IPO; nn feedback from investors may prove useful in preparing nn collecting and analysing the investors’ preliminary views on a roadshow presentation and fine-tuning the equity story. the company’s stock pricing;
Investor education nn analysis and formulation of key issues to be discussed during the roadshow; A research report is the cornerstone of the investor education phase and serves as the basis for investor dialogue at this nn creating optimum momentum and attracting investor stage. It is a source of information about the soon-to-go- interest before the roadshow meetings. public company and the sector, and includes, among other details, specific financial forecasts, independent review of the Expected outcome includes feedback on the company’s company’s growth prospects, and the stock pricing. strengths and weaknesses, preliminary investor interest in the IPO, and the guide price range. A research report is drawn up based on the presentation for the analyst, namely, a very detailed material prepared in Roadshow collaboration with the adviser and the company management and presented to the analyst during a day-long meeting. Roadshow is the key marketing event and a prerequisite for Typically, it takes the analyst about four weeks to prepare the the ultimate success of the IPO. Roadshow meetings coincide report. During that time, the analyst consults the management with the bookbuilding process, and their goal is to present board on an ongoing basis in order to clarify any issues and the company’s management board and its strategic vision doubts as they arise. On the other hand, the company’s to investors and encourage them to participate in the IPO. management board, in collaboration with the legal adviser, may During the roadshow, the management board will showcase submit their comments as to the factual contents of the report. the company’s strengths and growth prospect, and will address concerns voiced by investors at the investor education The investor education process is an essential part of the stage. marketing strategy. Analysts hold meetings or conference calls with all interested investors, both in Poland and abroad, to A typical roadshow takes 8–10 days, with 6–7 one-on-one showcase the company’s business model and the equity story and group meetings per day, which allows the company’s highlights, and to share their opinion as to the company’s management to reach a large target group of investors. fundamental value or potential risks associated with investing in its shares. After the meetings, the dialogue with investors is continued by the sales team to collect feedback on investor interest, share pricing, or the company’s strengths and weaknesses as perceived by investors. Based on that feedback and having regard to the adviser’s recommendation, the management board will set the share price range to be communicated to the investors, within which investors will place their subscriptions during bookbuilding.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 48 Premarketing, marketing and subscription
A typical roadshow day schedule Expected outcome:
nn presenting the company’s management board to Time Agenda prospective investors and broadening their knowledge 8.30 am – 10.00 am Group breakfast (hotel) about the company during one-on-one meetings;
10.30 am – 11.30 am One-on-one meeting (1) nn attracting more investor interest in the IPO.
11.45 am – 1.45 pm One-on-one meeting (2) Marketing targeted at retail investors
1.00 pm – 2.00 pm One-on-one meeting (lunch) Retail marketing involves also a PR agency. The campaign is based mainly on printed and electronic media (including 2.30 pm – 3.30 pm One-on-one meeting (4) business/industry press and websites). 3.45 pm – 4.45 pm One-on-one meeting (5) In order to reach out to a large retail pool, a syndicate of 5.00 pm – 6.00 pm One-on-one meeting (6) brokerage houses is formed; they spread the news about the transaction among their clients and offer them a possibility to Source: BZ WBK in-house analysis subscribe for the company shares.
Depending on the scale of the planned IPO, meetings may be PRICE RANGE AND FINAL IPO PRICE held both in Poland and abroad. Listed below are the most popular foreign locations where companies planning to float Price range their shares on the WSE organise their roadshows: Following the investor education process, the company’s nn London; management board, the investment bank and the selling shareholder (if any) examine the investors’ feedback and set nn Frankfurt; the price range for the IPO accordingly. Setting the price range is meant to maximise the actual price paid in the IPO and, at nn Paris; the same time, minimise the risk of unsuccessful offering. nn New York. The range usually equals 20%–30% between the maximum and the minimum price. The low end of the range is usually During the roadshow, both the analyst and the sales team unofficial (not to be made public) and set at a price level keep close contact and dialogue with prospective investors. acceptable for a significant majority of investors, which leaves the room for a certain degree of flexibility in response to Objectives: market volatility during the roadshow and the bookbuilding process. nn presenting the company, its management, and the strategic vision; The high end of the price range equals the maximum price in the retail subscription and is made public. The high end of the nn discussing the company’s market, strategy and growth price range: prospects. nn reflects the company’s maximum short-term sustainable value;
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nn stems from the price suggestions communicated by Setting the final price investors at the investor education stage. After the roadshow and bookbuilding are completed, the The price range should also take account of the expected final IPO stock price is set. The final price depends primarily post-IPO stock price movements at the WSE. The goal is to on investor demand and order book coverage at specific price build a well-balanced high-quality shareholding structure, levels, and in most cases it hovers within the price range set which will support optimum and sustainable stock price prior to launching the bookbuilding process. The decision dynamics after the IPO. to set the final price lies with the company’s management board and the selling shareholder (if any), and is based on Bookbuilding the bookrunner’s recommendation. Having set the final price, the company and the bookrunner will allocate the shares to After setting the price range, the bookrunner (investment investors. bank/brokerage house) will open subscriptions to investors. The order book will show different levels of demand at different prices. Subscriptions placed by investors may take various forms, including: nn limit orders (fixed number of shares with a price limit above which the investor will not take part in the IPO); nn no limit orders (fixed number of shares regardless of the final IPO price); nn orders where investors define the number of shares to be purchased at various price levels; nn orders where investors define the amount for which they will purchase shares, regardless of the final price (in which case the number of shares purchased at various price levels is not set).
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 50 Premarketing, marketing and subscription
Final price vs maximum price for selected IPOs in 2014-2016
Discount to Company Pricing date IPO value (PLNm) Maximum price Issue price maximum price Artifex Mundi Oct 16 99 PLN 33.00 PLN 22.50 -31.8% Stelmet Oct 16 182 – PLN 31.00 n.a. Playway Oct 16 62 PLN 55.00 PLN 52.00 -5.5% Celon Pharma Sep 16 245 PLN 16.33 PLN 16.33 0.0% Auto Partner May 16 85 PLN 2.90 PLN 2.20 -24.1% X-Trade Brokers DM Apr 16 189 PLN 13.00 PLN 11.50 -11.5% MasterPharm Apr 16 29 PLN 7.00 PLN 6.00 -14.3% i2 Development Apr 16 34 PLN 29.00 PLN 20.00 -31.0% Polski Bank Komórek Apr 16 56 PLN 66.50 PLN 47.00 -29.3% Macierzystych Archicom Mar 16 72 PLN 20.00 PLN 15.50 -22.5% Krynica Vitamin Dec 15 26 PLN 12.25 PLN 12.25 0.0% Enter Air Dec 15 98 PLN 17.00 PLN 14.00 -17.6% Kofola CeskoSlevensko Dec 15 121 PLN 102.30 PLN 80.53 -21.3% Lokum Deweloper Nov 15 36 PLN 15.00 PLN 12.00 -20.0% Korporacja KGL Nov 15 33 PLN 23.00 PLN 19.00 -17.4% Wittchen Oct 15 55 PLN 19.00 PLN 17.00 -10.5% Inpost Sep 15 121 PLN 33.00 PLN 25.00 -24.2% AAT HOLDING Sep 15 58 PLN 30.00 PLN 24.00 -20.0% Pekabex Jun 15 74 PLN 10.00 PLN 10.00 0.0% Atal May 15 143 PLN 24.60 PLN 22.00 -10.6% Braster May 15 39 PLN 19.00 PLN 15.00 -21.1% Uniwheels Apr 15 504 PLN 119.00 PLN 105.00 -11.8% Wirtualna Polska Apr 15 294 PLN 37.00 PLN 32.00 -13.5% Idea Bank Mar 15 254 PLN 32.00 PLN 24.00 -25.0% Private Equity Managers Mar 15 46 PLN 111.00 PLN 111.00 0.0% Dekpol Dec 14 29 PLN 21.00 PLN 15.00 -28.6% Skarbiec TFI Nov 14 44 PLN 44.00 PLN 32.50 -26.1% Vigo System Oct 14 53 PLN 220.00 PLN 180.00 -18.2% Coccodrillo Oct 14 15 PLN 17.40 PLN 14.90 -14.4% Polwax Sep 14 57 PLN 19.00 PLN 15.00 -21.1% Alumetal Jul 14 293 PLN 44.00 PLN 35.00 -20.5% Altus TFI Jun 14 175 PL 10.50 PLN 9.50 -9.5% Torpol Jun 14 184 PLN 8.00 PLN 8.00 0.0% PCC Rokita Jun 14 98 PLN 36.00 PLN 33.00 -8.3% Prime Car Management Apr 14 210 PLN 53.00 PLN 44.00 -17.0% LiveChat Software Apr 14 60 PLN 23.50 PLN 18.50 -21.3% Comperia.pl Jan 14 12 PLN 22.00 PLN 20.00 -9.1%
Source: WSE, company prospectuses
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 51 Premarketing, marketing and subscription
FORMING THE MANAGERS’ SYNDICATE prospectus drafting, developing the equity story, drawing up the research report, identifying target investors, as well as One of the first steps in the IPO process is to appoint IPO marketing and placement of the offering. Depending on the managers who will form a syndicate. It is also one of the most degree of involvement, there are three key roles an investment important decisions to be taken by the company, as a wrong bank or a brokerage house may take in the IPO: selection of advisers may not only protract the process, but also undermine the IPO’s success. 1) Global Coordinator – lead adviser in the transaction process;
Roles of investment banks in the IPO process 2) Joint Bookrunner;
Responsibilities of investment banks/brokerage houses involved 3) Manager. in an IPO include conducting due diligence, participation in
Roles of investment banks/brokerage houses in the IPO process
Global Coordinator
nn coordinates the IPO process and activities of other advisers, runs the order book, and prepares the research report
Joint Bookrunner
nn participates in the structuring and set-up of the transaction, runs the order book, and prepares the research report
Manager
nn prepares the research report
Source: BZ WBK in-house analysis
As the Global Coordinator plays the key role in the process, Structure of syndicates in transactions on the WSE it should possess certain skills and qualities which are a prerequisite for the IPO’s success: The actual number of syndicate members often depends on the size and structure of the planned IPO. In smaller nn superb insight into the local market and the WSE; transactions marketed exclusively among Polish investors, one investment bank is in charge of the entire IPO process. On the nn experience in handling IPOs of similar size on the WSE and other hand, large international transactions may involve quite in working as part of offering syndicates; a number of syndicate members. nn full availability of the team working locally; nn excellent relations with a large group of target investors; nn reputable equity analyst who will prepare the research report.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 52 Premarketing, marketing and subscription
Syndicate structure in selected IPOs in 2010-2016
Company Pricing date IPO value Global Joint Managers (PLNm) Coordinators Bookrunners Artifex Mundi Oct 16 99 1 0 0 Stelmet Oct 16 182 2 0 0 Playway Oct 16 62 1 0 0 Celon Pharma Sep 16 245 1 2 0 Auto Partner maj-16 85 1 0 0 X-Trade Brokers DM Apr 16 189 1 2 0 Polski Bank Komórek Macierzystych Apr 16 56 2 0 0 Archicom Mar 16 72 1 1 0 Enter Air Dec 15 98 1 0 1 Kofola CeskoSlovensko Dec 15 121 1 2 0 Wittchen Oct 15 55 1 0 0 Inpost Sep 15 121 3 0 0 AAT HOLDING Sep 15 58 1 1 1 Pekabex Jun 15 74 1 0 1 Atal May 15 143 2 0 0 Uniwheels Apr 15 504 1 1 0 Wirtualna Polska Apr 15 294 1 1 1 Idea Bank Mar 15 254 3 0 0 Alumetal Jul 14 293 1 1 1 Altus Jun 14 175 1 3 0 Torpol Jun 14 184 2 0 0 PCC Rokita Jun 14 98 2 0 0 Prime Car Management Apr 14 210 2 0 1 Energa Dec 13 2406 2 5 4 Newag Dec 13 398 1 0 0 PKP Cargo Oct 13 1423 3 3 2 PHN Feb 13 239 4 4 0 Alior Dec 12 2094 4 0 2 ZE PAK Oct 12 682 4 4 0 Coal Energy Jul 11 225 2 0 0 JSW Jul 11 5371 4 3 2 BGŻ May 11 312 2 2 0 Kruk SA Apr 11 369 1 2 0 Libet SA Apr 11 116 1 0 0 Open Finance Mar 11 446 2 0 0 GPW Nov 10 1208 4 4 5 Agroton Nov 10 585 2 0 0 Fortuna Entertainment Oct 10 309 1 0 1 TAURON Jun 10 4212 2 4 5 Kulczyk Oil Ventures May 10 362 3 0 0 PZU Apr 10 8069 2 4 0
Source: WSE, company prospectuses
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 53 Premarketing, marketing and subscription
Syndicate structure by IPO size in 2010-2016
4 10 9.1
3 8
6 2 4.0 3.1 4 2.6 1 1.9 2
0 0 <100 100-200 200-500 500-1000 1000< Average number of syndicate members Average IPO value (PLNm)
Global Coordinators Managers Joint Bookrunners Overall number of syndicate members (right axis)
Source: WSE, company prospectuses
DISTRIBUTION SYNDICATE IN THE RETAIL Members of the distribution syndicate not only take subscription orders from retail investors, but also inform TRANCHE their clients about the transaction and engage in marketing activities to promote the IPO. Syndicate members should have In most cases, shares in an IPO are offered to institutional good sales capabilities and optimum distribution channels to investors and to retail investors. The placement of company take subscriptions from retail investors, including their own shares with institutional investors is a responsibility of the networks of branch offices, web platforms, mobile apps, and managers or the investment bank/brokerage house involved private banking channels. in the process. In the retail tranche, a distribution syndicate of brokerage houses is formed to reach out to the largest possible group of prospective retail investors. Composition of the syndicate should be clearly defined and known prior to the start of the subscription period, and the number of entities involved often depends on the scale of the planned IPO and the size of the retail tranche.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 54 Premarketing, marketing and subscription
Retail syndicates in selected IPOs in 2011–2016
Share of Share of Number of IPO value Company Pricing date institutional retail tranche retail syndicate (PLNm) tranche [%] [%] members Artifex Mundi Oct 16 99 88% 12% 15 Stelmet Oct 16 182 90% 10% 2 Playway Oct 16 62 85% 15% 16 Celon Pharma Sep 16 245 87% 13% 12 Auto Partner May 16 85 91% 9% 9 X-Trade Brokers DM Apr 16 189 90% 10% 10 Polski Bank Komórek Apr 16 56 88% 12% 4 Macierzystych Archicom Mar 16 72 93% 7% 8 Enter Air Dec 15 98 97% 3% 7 Kofola CeskoSlevensko Dec 15 121 83% 17% 4 Wittchen Oct 15 55 92% 8% 3 Inpost Sep 15 121 83% 17% 5 AAT HOLDING Sep 15 58 85% 15% 4 Pekabex Jun 15 74 92% 8% 1 Atal May 15 143 88% 12% 2 Uniwheels Apr 15 504 95% 5% 3 Wirtualna Polska Apr 15 294 85% 15% 7 Idea Bank Mar 15 254 97% 3% 17 Alumetal Jul 14 293 90% 10% 5 Altus Jun 14 175 91% 9% 10 Torpol Jun 14 184 95% 5% 2 PCC Rokita Jun 14 98 85% 15% 1 Prime Car Management Apr 14 210 96% 4% 6 Energa Dec 13 2406 75% 25% 21 Newag Dec 13 398 90% 10% 18 PKP Cargo Oct 13 1423 17% 83% 20 PHN Feb 13 239 85% 15% 23 Alior Dec 12 2094 94% 6% 10 ZE PAK Oct 12 682 85% 15% 25 Coal Energy Jul 11 225 97% 3% 2 JSW Jul 11 5371 73% 27% 22 BGŻ May 11 312 70% 30% 22 Kruk SA Apr 11 369 90% 10% 2 Libet SA Apr 11 116 88% 12% 4 Open Finance Mar 11 446 85% 15% 2 Average 507 86% 14% 9
Source: WSE, company prospectuses
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 55 Premarketing, marketing and subscription
SETTLEMENT OF THE IPO AND REGISTRATION OF NEW SHARES
IPO process flow from pricing to first trading session
Registration of Subscriptions Share allocation Admission allotment certificates First trading day in the institutional and settlement of shares to trading and/or shares with on WSE and retail tranches of IPO on WSE CSDP
Source: BZ WBK in-house analysis
Subscriptions for offered shares system (retail investors only) or by brokers participating in the distribution syndicate (both retail and institutional investors). Once the order book is closed, and the final IPO price and the number of offered shares are set, investors place their If the retail tranche is oversubscribed then allocations are subscriptions on subscription forms drawn up in accordance proportionately scaled down and any overpaid amounts are with the relevant provisions of the Commercial Companies returned to investors. A high rate of such reduction reflects Code. Subscriptions must be paid for before they are placed. strong interest in the IPO among retail investors. The prospectus contains a list of investment firms and specific locations where subscriptions are taken from institutional Once the shares are allocated, the brokerage house instructs and retail investors. Subscriptions may also be placed via the the CSDP to transfer the shares to the investors’ securities Internet or by phone, in accordance with internal regulations accounts. If allocations are effected via the WSE IT system, of the entities taking the subscriptions. they are automatically recorded in investors’ securities accounts. Subscription periods may differ between tranches, depending on the agreed structure of the offering. Institutional investors Registration of shares will place their subscriptions in keeping with their declarations submitted during the bookbuilding. In the case of retail For shares and allotment certificates to be admitted to trading investors, typically either of the following two arrangements and listed on the WSE, the CSDP must first adopt a relevant is applied: resolution to register such shares and certificates in its depository system. nn subscriptions at the maximum price are placed during the bookbuilding; Therefore, under the Act on Trading in Financial Instruments, prior to launching the IPO a soon-to-go-public company must nn subscriptions are placed after the pricing, when the enter into a share registration agreement with the CSDP. The number of shares allocated to the retail tranche is known. company should also register with the CSDP all other bearer shares carrying the same rights as the rights attached to the Allocation of offered shares offered shares.
When all payments due for shares are collected, which Upon registration, the shares are converted into securities in should take place before the close of the last day in the book-entry form, i.e. they are no longer certificated securities. subscription period, shares are allocated to institutional and The CSDP also assigns an ISIN code to the shares. retail investors. The process may be carried out via the WSE IT
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 56 Premarketing, marketing and subscription
Registration of shares at the Central Securities Depository of Poland – process flow
I) The issuer signs an agreement with the CSDP to participate in the depository system
nn on first-time application to the CSDP for registration of its securities, a company should also apply for an agreement to participate in the depository system as an issuer
nn the participation agreement (i.e. a relevant resolution of the CSDP Management Board) is executed within two weeks (10 business days) of submission of the application and a complete set of the required documents
II) The issuer signs an agreement with the CSDP to have its securities registered in the system
nn to be able to sign the registration agreement, the company should file a complete set of the required documents with the CSDP
nn upon registration, the shares are converted into securities in book-entry form
nn the registration agreement is deemed to have been executed when the CSDP Management Board passes a resolution to register company securities in the depository. The resolution specifies the manner of registration and the ISIN code assigned to the securities
III) The securities are registered in accounts held at the CSDP
nn upon registration, the shares are deposited in the investor’s brokerage accounts
Source: CSDP
Admission of shares to trading on the WSE 1 the company applies to the CSDP for registration of shares;
Once the CSDP passes the resolution to register shares in 2 the CSDP passes a preliminary resolution to register the the depository system, the company applies to the WSE shares; for admission of the shares to trading and their listing, which will require adoption of relevant resolutions by the 3 the company applies to the WSE for admission of the WSE Management Board. The application for admission to shares to trading (with the CSDP’s preliminary resolution stock-exchange trading, along with an opinion issued by the attached to the application); investment firm (on satisfaction of all conditions for admission to stock-exchange trading), is submitted by the issuer directly 4 the WSE passes a resolution to admit the shares to trading to the WSE Management Board on a pre-defined form. and to list them;
Registering shares with the CSDP and applying for admission 5 based on the WSE’s resolution, the CSDP registers the of the securities to trading on the WSE are concurrent securities, which are then converted into securities in book- processes. A simple step-by-step overview of those processes entry form and are recorded in the investors’ brokerage is presented below: accounts;
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 57 Premarketing, marketing and subscription
6 the company shares are floated on the stock exchange, i.e. Furthermore, when considering the company’s application, they become listed securities. the WSE will take into account certain other factors, including: For shares to be admitted to trading and listed on the WSE, a number of conditions set forth in the WSE Rules and the nn adequate liquidity of the shares; Detailed Exchange Trading Rules in UTP System must be satisfied. Accordingly, shares may be admitted to stock- nn adequate capitalisation; exchange trading (on the main market or the parallel market) only if: nn the company’s current and expected financial standing; nn the company’s prospectus has been approved by the PFSA; nn growth prospects; nn the shares are freely transferable; nn experience and qualifications of the company’s governing bodies; nn no insolvency or liquidation proceedings are pending against the issuer; nn security of stock-exchange trading and interests of its participants. nn the company’s capitalisation equals at least PLN 60m or the PLN equivalent of EUR 15m 6; The WSE Management Board is allowed 14 days from the filing of a complete application to vote on a resolution to nn the shareholders of whom each holds less than 5% of authorise admission of the shares to trading. total voting rights at the issuer’s general meeting must hold at least: Floatation of shares
15% of the shares whose admission to stock-exchange Upon grant of admission to trading by the WSE Management trading is sought (or 25% in the case of the main Board, the issuer will have six months to float the shares market), and on the WSE. Otherwise, the WSE Management Board may revoke its earlier resolution to admit the shares to stock- 100,000 shares which are to be admitted to stock- exchange trading. exchange trading, with a minimum value of EUR 1m, calculated at the final selling or issue price (or 500,000 The shares are floated on the date of first listing, i.e. the date with a minimum value of EUR 17m – if the shares are to when the company goes public on the WSE. be floated on the main market); nn there must be a sufficient number of shareholders to ensure a liquid market for the shares.
6 If the issuer’s shares have already been traded for at least six months on another regulated market or on NewConnect, the issuer’s market capitalisation may equal not less than PLN 48m or the PLN equivalent of EUR 12m.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 58 Investors – targets of IPO transactions
59 Investors – targets of IPO transactions
TARGET INVESTOR GROUPS IN IPOs other syndicate members) is to build and run the order book among institutional investors (bookbuilding). A well-thought-out structure of the prospective investor base is one of the factors key to the success of any IPO Generally, there are three main groups of investors involved transaction. The list of proposed investors is prepared by in secondary trading on the WSE’s equity market, with the the investment firm which acts as the offering broker or IPO following breakdown of their market shares in 2016: foreign coordinator. In selecting prospective investors, the investment institutional investors – 53%, Polish institutional investors – firm takes into account specific characteristics of the IPO, 34%, and Polish retail investors – 13%. The same groups may such as the transaction value, the issuer’s industry, or the also participate in IPO transactions (primary market). target shareholding structure. One of the tasks of the offering broker (and, in the case of high-value offerings, also of the These investor groups are briefly described below.
Target investor groups in IPOs
Foreign investors Polish investors
Institutional investors Institutional investors Retail investors
nn Investment banks nn Investment fund management nn Active investors trading on nn Global emerging market funds companies the stock exchange nn European emerging market funds nn Open-end pension funds nn New investors nn Global funds nn Insurance companies nn Issuer’s employees and trading nn Global sector funds nn Banks partners nn Global pension funds nn Assets management nn Insurance companies, hedge funds nn Other legal entities nn ETFs nn Sovereign wealth funds (SWFs)
nn European financial hubs: London, Frankfurt, nn Nearly all Polish institutional investors have their headquarters or Vienna, Stockholm, Helsinki, Copenhagen, Zurich, offices in Warsaw Geneva nn To market an IPO among Polish retail investors, the options to nn In IPOs looking for global investors, the list will also consider include a roadshow in the country’s largest cities or include investors based in New York, Boston, Tel meetings held as part of national conferences or forums of retail Aviv and Dubai investors.
Source: Trigon DM in-house analysis
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 60 Investors – targets of IPO transactions
Selection of the target nn global and European emerging market funds – a group of investors focusing on expanding their share in a country’s investor group will equity market. Their portfolios often track single country indices (e.g. WIG20) or regional indices (e.g. the Vienna- determine the type of based CECE, MSCI Poland Investable Market Index – IMI, MSCI Emerging Markets, or FTSE Emerging Europe Index). marketing activities Those funds are highly flexible as they can invest across various sectors and countries; necessary to pave the way nn global funds – a group of risk-shy investors who tend to for and successfully close rely on more prudent valuations and apply more stringent criteria to company size and stock liquidity; the IPO. nn hedge funds – a group of investors focusing on the overall rate of return and on comparable companies’ valuations For instance, if a soon-to-go-public company intends to on the secondary market as part of the arbitrage approach attract foreign investors, the roadshow should be taken (differences between valuations of peer companies from also to financial hubs outside of Poland. To make it happen, the same sector). IPO investment decisions made by most the company may consider hiring another (foreign) bank or hedge fund managers usually hinge on the optimum brokerage house to act as the international bookrunner. structuring of the order book and expected liquidity of future stock listings; If, on the other hand, the IPO is to be addressed to Polish investors only, roadshow meetings in Warsaw will suffice. nn sovereign wealth funds (SWFs) – a group of state- owned investors managing public savings, with long- For a high-value IPO, the company may consider formation term investment horizons. As a rule, they prefer large of a distribution syndicate bringing together several (up to transactions and focus on companies based in countries twenty) brokerage houses which will offer the shares to and with high and sustainable economic growth. SWFs can take subscriptions from Polish retail investors. prove to be a very powerful source of demand in an IPO, as they tend to invest in major holdings of share capital. INVESTOR PROFILES Therefore, they may take large positions as anchor or cornerstone investors, thus encouraging other prospective Typical investor groups in IPO transactions are briefly buyers to participate in the offering; described below: nn European Bank for Reconstruction and Development nn Polish retail investors – the second most widely represented (EBRD) participates in IPOs in developing countries investor group in Polish IPOs (beside Polish institutional which are meant to further the development of their investors). In their decision-making, those investors rely on market economies. The EBRD usually invests in large-cap analysts’ publicly expressed opinions and research reports, companies with a long-term growth potential and good and usually invest short term; reputation on the market. nn Polish institutional investors – main participants of Polish IPO transactions, with the best understanding of and insight into the issuer’s business. As a rule, those investors apply the fundamental approach to IPOs and look for growth companies, usually taking long-term positions;
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 61 Investors – targets of IPO transactions
IPO STRUCTURING BY TARGET INVESTOR and inviting investors to GROUPS join the IPO. Every IPO is different and driven by unique circumstances and conditions; therefore, the list of prospective investors is never fixed. It is important to remember that the stock market is cyclical by nature; there are periods when the market is more receptive to IPOs and periods when investors show no interest Each investor group, and in public offerings at all. Therefore, a company planning to go public should take account of the current market climate also each investor, applies and investor sentiment, as well as the potential for successful his or her own criteria stock placement. The key factors taken into account by investors in deciding to investment decisions, whether to participate in a public offering are listed below. The sum of those factors, combined with the stock price, which should be taken into often determine whether investors find an IPO attractive. account when selecting
IPO drivers
EQUITY STORY
PARTICIPATION IPO OF FOREIGN SIZE INVESTORS
PARTICIPATION ISSUER’S IN STOCK-EXCHANGE COVERAGE INDICES
TARGET ISSUER’S SHAREHOLDING INDUSTRY STRUCTURE
NEW SHARES/EXISTING SHARES
Source: Trigon DM in-house analysis
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 62 Investors – targets of IPO transactions
These IPO drivers are described in more detail below: nn participation in stock-exchange indices – depending on the company’s future capitalisation and share in trading nn equity story – the message to investors, including business volume, the stock exchange will decide whether to include highlights and milestones, growth strategy, investment the stock in one of the market indices (such as WIG 20, plans, capital expenditure, and financing sources, including mWIG40, or sWIG80); use of proceeds from the IPO; nn participation of foreign investors – cross-border IPOs will nn IPO size – size of the public offering will determine attract more investors and the stock placement is more whether it will be placed in Poland only or both in Poland effective, as the issuer is able to tap more opportunities and abroad. IPOs worth below PLN 200m-300m are based on investors’ country preferences. marketed exclusively among Polish investors; nn issuer’s coverage – local (domestic), regional (neighbouring The choice of investors to countries), the European Union, or global. A company with presence both in and outside Poland will enjoy more be invited to participate recognition among foreign investors; in the IPO should take nn issuer’s industry – most sectors of the economy are represented on the stock exchange; these can be broken account of their pre- and down into sectors with the highest market share in terms of value (banking, fuels, power, insurance, chemicals, post-IPO roles. food, property development, or retail trade) and sectors with the largest number of listed companies (finance, The basic roles which may be ”assigned” to investors are construction, IT, machine engineering, wholesale trade, described below: retail trade, food, and pharmaceuticals). Various investor groups have their own preference as to the choice of the nn long-term investors – they are interested in long-term issuer’s sector. In particular, this applies to sector funds, investments only, and their main strategy is to bolster which are interested primarily in companies representing the company’s value (as represented by a higher stock particular industries; price and a growing share in the equity market). Most institutional investors take long-term positions. This nn new issue/existing stock – an IPO may involve both holds true especially for Polish pension funds, insurance new shares (increase in the issuer’s share capital) and companies, and investment funds; the existing shares (secondary sale by the existing shareholders). Most IPO investors prefer new shares; nn short-term investors – usually retail investors who invest limited amounts of money for short-term gains with nn target shareholding structure – the planned target a quick exit strategy. This group is a source of initial stock shareholding structure, with a breakdown into existing liquidity after floatation; and new shareholders, will also have a bearing on the offering’s outcome. If new shareholders are in the majority, nn stabilization agent – usually a bank which enters into the stock will be more liquid. Also, floatation of any shares a contractual arrangement with the issuer to buy or sell issued earlier and held by the existing shareholders will be shares during the period of their increased distribution an important factor. If this is the case, a lock-up is usually within the first 30 days after the IPO; put in place for 12 months to avoid a ”share overhang” from the existing shareholders in the initial post-IPO nn underwriter – an entity bound by a standby or firm period; commitment underwriting agreement signed with the issuer. A standby underwriter agrees to purchase a certain
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 63 Investors – targets of IPO transactions
number of shares for its own account, while a firm At this stage, the split into institutional and retail tranche commitment underwriter (a bank or investment firm) becomes fixed. guarantees to purchase all of the offered securities and then place them on the market. All these marketing activities are meant to ensure the optimum IPO structure by: The terms and conditions of an IPO are set out in the prospectus. As a rule, a preliminary tranche split is determined nn building a strong and healthy order book, in keeping with prior to the offering and is usually based on the 80/20 or all terms and conditions of the IPO, and maximising the 90/10 rule (namely, 80-90% of the shares are to be offered share price; to institutional investors, while the remaining 20-10% will be placed with retail investors). The IPO’s success will nn attracting anchor investors who will be guaranteed full depend primarily on the level of interest generated among allocation in the bookbuilding process in exchange for institutional investors. Importantly, the terms and conditions earlier declaration to buy shares in the offering; of the public offering provide for flexible adjustment of the tranche split, which becomes fixed only after the close of the nn attracting long-term investors; bookbuilding. nn securing optimum initial liquidity of shares (free float) by IPO marketing activities are rolled out among institutional placing the offering among a large group of retail investors investors on a step-by-step basis, starting from pilot fishing, and selected institutional investors. through publication of the research report, pre-deal investor education, gauging investor interest, setting the price range, For more information about the steps of the IPO process, management road show, and finally the pricing. The ultimate please refer to the Premarketing, marketing and subscription goal is to attract at least one anchor investor who would take section of this Guide. up 5% or more of the offered shares.
After gauging the institutional demand, short-listed prospective investors are invited to join the bookbuilding process, which leads to the pricing and share allocation.
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 64 The public life of the company
65 The public life of the company
GOOD DISCLOSURE POLICY BUILDS In an IPO, the use of state-of-the-art communication platforms VALUE FOR SHAREHOLDERS AND and meetings with investors held all around the country are part and parcel of the process. They offer an opportunity to PROSPECTIVE INVESTORS showcase the company as an attractive target for investors and to collect investor feedback, which will underpin the ultimate The importance and objectives of investor investment strategy. The process should be carefully planned relations and launched well ahead, and is meant primarily to raise the company’s credibility among its stakeholders. As the capital market expands and the potential for raising capital on organised markets grows, the quality of company’s A truly effective IR model involves a number of elements, relations with market participants is becoming increasingly such as transparency, credibility, consistency, timeliness, important. In that context, investor relations play a crucial interactivity, listening skills, compliance with the law, as well role. According to the National Investor Relations Institute, as cross-references to the company’s business activities. ”investor relations is a strategic management responsibility that integrates finance, communication, marketing and compliance Role of IR specialist in the IPO to enable the most effective two-way communication between a company, the financial community, and other constituencies, Participation of an IR specialist in the IPO process is of which ultimately contributes to the company’s securities key importance for the successful pretransaction investor achieving fair valuation”. education showcasing the company’s market positioning and business model. In addition to effective investor The benefits offered by well-managed investor relations are communication and the financial analyst’s efforts to indeed invaluable. For a company that goes public, they can encourage full coverage of the order book, a soon-to- either drive its stock price up or down and set the overall go-public company must also be prepared to handle tone of the IPO. Effective communication with investors unforeseen events which may occur during the IPO and and with the market will bolster their confidence in the weigh heavily on the company’s position. company, improve the issuer’s public profile, lower the cost of capital, and increase stock liquidity. A public company must Key focus points for investors in the IPO build sustainable relations with all stakeholders, including shareholders, analysts, the media, as well as institutional Investors are on the lookout for companies which offer good and retail investors. Communication with the capital growth prospects, are managed by a competent and reliable market should be based on bilateral relations. On the one team, operate in a transparent and coherent manner, and hand, a company should communicate current events and have a clear and effectively communicated strategy in place. developments in a well-thought-out manner; on the other, Obviously, a strong equity story is the cornerstone of any the market will react to such information. Equally important successful IPO. With a convincing presentation of its business are also the company’s disclosure obligations. model and growth prospects, the company is able to sell more stock to investors as it goes public. IR tools and target investors Types of IR contacts The most widespread IR tools include current and periodic reports; corporate newsletters and websites; telephone calls; nn investors – the IR programme should focus on effective press briefings; meetings and conference calls with financial communication with both institutional and retail investors, analysts, shareholders and investors; investor conferences; and its overarching objective is to build long-term investor and roadshows. To both current and prospective investors, confidence. Communicating all important corporate events the involvement of the company’s directors in all IR activities to investors will bolster the company’s credibility and is extremely important, as it signifies that a given stakeholder may drive up the stock price (assuming that the company group actually matters to the company. also delivers strong financials). Investor calendar and
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 66 The public life of the company
participation in all major business events and initiatives are nn media – communication with journalists should be as useful tools in building successful investor relations; transparent and unambiguous as possible, and clarity of the message is of key importance. To that end, the nn analysts – build business models based on past trends and company must educate the media on its business and the their own predictions of the company’s future growth, capital market reality. and communicate their findings and forecasts, as well as the company’s valuation with necessary background As a rule, best relations with stakeholders are always based information, to their clients and other market participants. on two-way communication. Any feedback, opinions and Therefore, a company needs to have a solid and consistent different perspectives communicated by investors may help communication model in place, in order to present reliable the company’s management in developing and fine-tuning information to analysts and to receive feedback in the the optimum investment strategy. most effective manner;
A typical timeline of IR activities during the IPO:
6–12 months prior nn selection of the investment firm/financial adviser and other IPO advisers to IPO nn developing publicity guidelines and strategy
Prospectus nn ITF (intention to float) announcement approval nn publication of the ITF announcement
nn organisation and control of proper roadshow execution Premarketing nn PR/marketing activities through appropriate distribution channels and roadshow nn stepping up IR activities to bolster interest in the IPO and the issuer
IPO nn managing media communications and monitoring market feedback on the WSE
5–7 days nn roll-out of the investment strategy to keep up the market momentum after the IPO
Source: WSE in-house analysis
IR checklist nn prepare the management roadshow and Q&A sessions; nn obtain access to ESPI; nn develop investor communication guidelines; nn develop the company’s strategy and growth plans; nn develop the internal IR rules; nn select and collaborate with financial analysts; nn prepare the presentation for investors;
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nn prepare the official IPO event and effective communication start to disclose their inside information from the date of with the media; applying for the admission of their securities to trading on a regulated market. The issuer will evaluate, on a case-by- nn publish background company information (organisational case basis, whether given circumstances and events meet structure, track record, business profile, and resumes of the definition of inside information, as provided for in Article management and supervisory board members); 7 of the Market Abuse Regulation, and decide whether this information is to be made public (without delay or, in nn prepare periodic and current reports; certain circumstances, subject to delayed disclosure, pursuant to Article 17.4 thereof). Inside information should also be nn prepare the IR calendar. published and be available for five years on the issuer’s website. Disclosure requirements Issuers are also obliged to publish current and periodic Disclosure requirements are there to ensure that both current reports (including quarterly, half-year and full-year financial and future holders of financial instruments have access to statements). Their scope, content and manner of publication all significant information about a public company, and are are set out in the Regulation of the Minister of Finance on meant to eliminate information asymmetries among market current and periodic information to be disclosed by issuers participants. of securities and conditions for recognising as equivalent of information required under the laws of a non-member state. Information disclosed by public companies is used by investors as a basis for the assessment of their operating The immediate publication clause applies also to any and financial position and growth prospects. Therefore, notifications from shareholders on exceeding a certain compliance with disclosure requirements by public companies threshold of total voting rights, as well as the information on enhances investors’ confidence in the capital market in any transactions in the issuer’s shares concluded by persons general, which also brings a number of benefits to the issuers discharging managerial responsibilities (primary insiders), in the longer term: good image, higher stock valuation, and as well as persons closely associated with them, which is lower financing costs in the future. communicated by those persons pursuant to the Act on Public Offering or the Market Abuse Regulation. In order to satisfy disclosure requirements, the company must be well prepared to face new challenges, which will involve All reports containing inside information as well as current building the awareness among the issuer’s management and periodic reports must be transferred and filed via the and supervisory board members, introducing new disclosure electronic report filing system (ESPI) managed by the PFSA. responsibilities for selected staff members, as well as adopting For more information on how to access and use the ESPI and effectively rolling out disclosure-related procedures. system, visit the PFSA website.
Disclosure requirements include the obligation to publish Compliance with the disclosure requirements is supervised by inside information as well as current and periodic reports. the PFSA. In the event of any identified non-compliance, the PFSA may impose administrative sanctions both on the non- Mandatory immediate publication of reports containing complying company and on members of its management or inside information is provided for in Regulation (EU) No. supervisory board. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation), and applies to all issuers who have requested admission of their financial instruments to trading on a regulated market, or whose securities have been admitted to trading on a regulated market. Therefore, such issuers must
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69 Definitions of terms
Accountancy Act – Polish Accountancy Act of September to identify and define the scale of financial, operational and 29th 1994 (Dz.U. of 2013, item 330, as amended). legal risks associated with the company’s business.
Act on Trading in Financial Instruments – the Polish Act on Dz.U. – the Journal of Laws of the Republic of Poland. Trading in Financial Instruments of July 29th 2005 (Dz.U. of 2014, item 94, as amended), which sets out, among other EBI – Electronic Information Base, the WSE electronic system things, the rights and obligations of entities engaged in used by public companies to submit current reports on the trading in financial instruments. non-application of corporate governance principles.
Allotment certificates, PDAs – certificates of allotment of new EBITDA (Earnings Before Interest, Taxes, Depreciation and shares. Amortization) – the company’s operating profit before interest on interest-bearing liabilities, taxes, depreciation of property, Civil Code – the Polish Civil Code of April 23rd 1964. plant and equipment, and amortization of intangible assets.
Code of Best Practice for WSE Listed Companies – a set ESPI – the electronic report filing system operated by the PFSA of corporate governance principles and recommendations and used by issuers to submit inside information, current applicable on the WSE. reports, and periodic reports.
Commercial Companies Code – the Polish Commercial EU – the European Union (including 28 Member States). Companies Code of September 15th 2000 (Dz.U. of 2013, item 1030, as amended), which provides the framework for Euro, EUR – the currency introduced at the beginning of the the formation, organisation, operation, mergers, demergers third stage of the European Economic and Monetary Union and change of legal form of commercial-law companies, under the Treaty Establishing the European Community. including joint-stock companies. European Commission – an executive body of the European Criminal Code – the Polish Criminal Code of June 6th 1997. Union which represents the interests of the EU as a whole.
CSDP – Krajowy Depozyt Papierów Wartościowych S.A., IAS – International Accounting Standard(s). Central Securities Depository of Poland, and, unless the context requires otherwise, the depository for securities it operates. IFRS – International Financial Reporting Standard(s).
CSDP Rules – Rules of the Central Securities Depository of IPO – an Initial Public Offering. Poland, setting the framework for the registration of financial instruments with the CSDP. IR (Investor Relations) – according to the National Investor Relations Institute, ”investor relations is a strategic management Detailed Exchange Trading Rules in UTP System – Detailed responsibility that integrates finance, communication, marketing Exchange Trading Rules in UTP System adopted under WSE and securities law compliance to enable the most effective Management Board Resolution No. 1038/1012 of October two-way communication between a company, the financial 17th 2012, as amended. community, and other constituencies, which ultimately contributes to the company’s securities achieving fair valuation”. Detailed Rules of Operation of CSDP – Detailed Rules of the Operation of the Central Securities Depository of Poland. ISIN code, ISIN – the International Securities Identification Number assigned by the CSDP to identify securities and Due diligence – a process involving detailed analyses designed financial instruments. ISIN is a unique code assigned in to evaluate the quality and sustainability of the company’s accordance with the ISO 6166 standard and with guidelines performance, its market positioning, and accuracy of its of the Association of National Numbering Agencies. financial and legal documentation. Due diligence also seeks
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 70 Definitions of terms
KRS – Krajowy Rejestr Sądowy, Polish National Court Register. including (but not limited to) brokerage houses, banks, foreign investment firms, investment funds or investment Market Abuse Regulation – Regulation (EU) No 596/2014 of fund management companies, and pension funds. the European Parliament and of the Council of April 16th 2014 on market abuse and repealing Directive 2003/6/EC of Regulation 809 – Commission Regulation No. 809/2004 the European Parliament and of the Council and Commission of April 29th 2004 implementing Directive 2003/71/EC Directives 2003/124/EC, 2003/125/EC and 2004/72/EC. of the European Parliament and of the Council as regards information contained in prospectuses as well as the NBP – Narodowy Bank Polski, the National Bank of Poland. format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (OJ L 149). NewConnect – the alternative trading system (ATS) The Regulation defines, among other things: (i) the format established in 2007 by the WSE for SMEs at various stages of of a prospectus, (ii) the minimum information requirements development and representing a variety of sectors. to be included in a prospectus, (iii) the method of publication of a prospectus, and (iv) the modalities according to which OECD – the Organisation for Economic Co-operation and information can be incorporated by reference in a prospectus, Development. (v) the methods of dissemination of advertisements.
PFSA/the Office of PFSA – Komisja Nadzoru Finansowego/ Regulation of the Polish Minister of Finance of October 18th Urząd Komisji Nadzoru Finansowego, the Polish Financial 2005 – Regulation of the Polish Minister of Finance on the Supervision Authority, and the Office of the Polish Financial scope of information to be disclosed in financial statements Supervision Authority. and consolidated financial statements required to be included in prospectuses of issuers domiciled in Poland to whom the PLN, złoty, the Polish złoty – the lawful currency in Poland. Polish accounting standards apply, dated October 18th 2005 (Dz.U. No. 209, item 1743, as amended). Prospectus Directive – Directive 2003/71/EC of the European Parliament and of the Council of November 4th 2003 on Regulation S – regulation issued under the United States the prospectus to be published when securities are offered Securities Act. to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, p. 64). The Prospectus Directive SMEs – small and medium-sized enterprises meeting at least seeks to harmonise the requirements for drafting, approval, two of the following three criteria: average headcount in and distribution of the prospectus to be published when a financial year below 250, total assets below EUR 43m, and securities are offered to the public or admitted to trading on full-year net revenue below EUR 50m. a regulated market in an EU Member State. Stock Exchange Rules, WSE Rules – Rules of the Warsaw Public offering – a communication made in any form and by any Stock Exchange, as adopted by way of Resolution No. means to at least 150 persons or to an unspecified addressee, 1/1110/2006 of the WSE Supervisory Board of January which contains sufficient information on the securities to be 4th 2006, as amended, which set out the conditions for offered and the terms and conditions of their acquisition, so as admission of financial instruments to trading and their listing. to enable an investor to decide to purchase these securities. WSE Management Board – the Management Board of the Public Offering Act – the Polish Act on Public Offering, Warsaw Stock Exchange. Conditions Governing Admission of Financial Instruments to Organised Trading, and Public Companies, dated July 29th WSE, Warsaw Stock Exchange – Giełda Papierów 2005 (Dz.U. of 2013, item 1382, as amended). Wartościowych w Warszawie S.A., unless the context requires otherwise, the regulated market it operates. Qualified institutional buyers – financial institutions or other legal entities authorised to operate on financial markets, WTO – the World Trade Organization.
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72 Contributors
MBANK WHITE & CASE mBank S.A. is one of Poland’s largest universal banks, with White & Case is one of the leading international law firms. the market presence dating back to 1986. It has been listed It currently operates 39 offices in 28 countries in the world’s on the WSE since 1992. Through a network of branch largest financial hubs and industrial centres. It has been offices, the bank operates also in the Czech Republic and present in Poland for the past 25 years. Slovakia. Since its inception, the bank has offered services both to SMEs and large corporate clients. Its service offer The White & Case Warsaw office has one of Poland’s most comprises the full range of investment banking services, recognised capital market practices. In recent years, White including M&A transactions as well as private placements and & Case has successfully advised in an impressive number public offerings of securities. In 1991-2016, Dom Maklerski of the largest and most complex high-profile equity and mBanku S.A. (mBank’s Brokerage House) participated in 100 debt transactions. With its wide-ranging experience and capital market transactions, including Initial Public Offerings international presence, the firm is able to offer a full scope (IPOs), Secondary Public Offerings (SPOs), and Accelerated of services in both domestic and cross-border transactions Bookbuilding transactions (ABB). The mBank Group operates governed by the laws of the US, the UK and Poland. one of Poland’s largest portfolios of retail investment accounts and has built lasting relations with Polish and foreign White & Case’s qualifications, experience and professionalism institutional investors, which provides strong placement have been confirmed by international legal rankings, capabilities. In 2016, mBank’s equity research team topped including Chambers, The Legal 500 and IFLR1000, which the annual ranking of best equity research teams published have recommended White & Case as one of Poland’s leading by the Gazeta Giełdy Parkiet daily. mBank also received an law firms (Band 1 and Band 2) specialising in Equity Capital award from the WSE for the highest aggregate value of IPOs Markets and Debt Capital Markets, among other areas. managed in 2015. In 2015, the White & Case capital market practice was recognised as the Top Law Firm of the Year 2015 in the CEE mBank S.A. Capital Markets Awards organised by EquitiesPoland.pl and ul. Senatorska 18, 00-082 Warsaw, Poland BiznesPolska. Tel.: +48 22 332 20 00 Email: [email protected] White & Case M. Studniarek i Wspólnicy www.mbank.pl – Kancelaria Prawna sp.k. ul. Marszałkowska 142, 00-061 Warsaw, Poland Tel.: +48 22 50 50 100 Email: [email protected] www.whitecase.com
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DOM MAKLERSKI PKO BP WEIL, GOTSHAL & MANGES
Dom Maklerski PKO Banku Polskiego launched its operations Established in 1931, Weil is currently one of the most in 1991 as part of CEE’s largest bank – Powszechna Kasa renowned international law firms on the market, providing Oszczędności Bank Polski S.A. For more than 25 years, Dom comprehensive legal services to institutional clients and Maklerski PKO BP has contributed to shaping Poland’s capital companies from all economic sectors. Approximately market, gained in-depth knowledge and extensive experience, 1,100 attorneys work in 19 offices in Europe, the United and become one of the market leaders. It boasts Poland’s States and Asia. largest brokerage service network, with more than 1100 broker service desks and 33 customer service offices. Dom Weil’s Warsaw office, established in 1991, is a leading Maklerski PKO BP brings together a team of professionals international law firm on the Polish market. Approximately 75 with long-standing experience gained both in Polish and attorneys are based in Warsaw, including Polish legal advisors international banks, consulting companies, law firms, and and advocates, as well as lawyers licensed to practice law in public administration bodies, which is a source of extensive the United States and the United Kingdom. Weil Warsaw’s expertise and allows the firm to provide comprehensive practice focuses particularly on capital markets, corporate services to retail and institutional clients both in Poland and law, mergers and acquisitions, banking and finance, tax, abroad. litigation, and dispute resolution. For many years it has been ranked among Poland’s top law firms byChambers and Dom Maklerski PKO Banku Polskiego offers investment Partners, The Legal 500 and IFLR1000, the world’s most banking services in three areas: Equity Capital Markets (ECM), prestigious legal publishers, and its attorneys have been Corporate Finance, and Debt Capital Markets (DCM). Since recognised as leading specialists. 2010, it has successfully placed 17 IPOs on the WSE, worth in aggregate over PLN 25bn. It has also participated in corporate Weil, Gotshal & Manges – Paweł Rymarz sp.k. debt offerings with a total value in excess of PLN 2bn. ul. Emilii Plater 53, 00-113 Warsaw, Poland Tel.:+48 22 520 4000 Dom Maklerski PKO Banku Polskiego received multiple Email: [email protected] awards from capital market institutions and the media for www.weil.com its contribution to the creation and development of Poland’s capital market.
Dom Maklerski PKO Banku Polskiego ul. Puławska 15, 02-515 Warsaw, Poland Tel.: +48 22 521 80 00 Email: [email protected] www.dm.pkobp.pl
The Main Market | An Issuer’s Guide to listing on the Warsaw Stock Exchange | 2017 74 Contributors
PwC BZ WBK
PwC is the world’s leading provider of professional consulting Bank Zachodni WBK S.A. is the third largest bank in Poland. services, addressing important issues and building confidence In 2011, it joined the international Santander Group which in the society. Tapping into the knowledge and experience serves over 100 million clients at 14 thousand branch offices of more than 233 thousand employees in 157 countries, in 30 countries around the world. With such impressive PwC supports its clients in audits, business consultancy, as market diversification, Santander is one of the world’s largest well as tax and legal advisory services. Having developed financial groups and the largest financial institution in the a technology consultancy business, PwC is also engaged eurozone. in tech projects. In Poland, PwC employs more than 3500 specialists and support staff in eight cities: Gdańsk, Katowice, The bank’s ECM Department, part of Global Corporate Kraków, Łódź, Poznań, Rzeszów, Wrocław, and Warsaw. PwC Banking, offers investment banking services related to offers services to clients across all sectors of the economy, equity offerings (both new and existing shares), IPOs and from major corporate players to local family businesses. SPOs. It also participates in accelerated bookbuilding (ABB) transactions, and advises on and participates in tender offers. PwC’s Capital Markets Team has extensive experience in For many years, Bank Zachodni WBK has been one of the IPOs at the WSE, confirmed by the WSE Partner – Primary most active brokers in Poland’s capital markets. The ECM Market Leader status. PwC specialists also participated in team has extensive expertise in raising capital through equity consultations on the implementation of prospectus laws into issues and in floating shares on the Warsaw Stock Exchange. the Polish legal framework, and have gained recognition as In the past three years, it has successfully closed nearly 25 experts in European legislation and best market practices. transactions worth around PLN 9.5bn.
PricewaterhouseCoopers Sp. z o.o. Bank Zachodni WBK S.A. Al. Armii Ludowej 14, 00-638 Warsaw, Poland Aleja Jana Pawła II 17, 00-854 Warsaw, Poland Tel.: +48 22 523 4000, Tel.: +48 22 782 9140 Email: [email protected] Email: [email protected] www.pwc.pl www.bzwbk.pl
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BAKER McKENZIE TRIGON DOM MAKLERSKI
Baker McKenzie is one of the world’s leading law firms, TRIGON is Poland’s leading investment banking and asset employing more than 6 thousand lawyers in 77 locations management group. It has been an active player in Polish in 47 countries around the globe. The Warsaw office was and CEE capital markets since 1989, being one of the WSE’s opened in 1992, and its current headcount stands at founding members. around 100 lawyers and tax advisers. Baker McKenzie offers comprehensive legal services in such areas of expertise as The total value of all transactions closed by TRIGON since financial markets, M&A, intellectual property, hi-tech, real 2010 is about USD 25bn. TRIGON advised in the acquisition property, infrastructure, dispute resolution, power, public- of Polkomtel S.A. by Spartan Capital Holdings sp. z o.o., private partnership, commercial law, tax law, competition Poland’s largest ever transaction in the telecoms sector, worth law, labour law, as well as banking and finance. PLN 18bn. TRIGON was the first Polish adviser to be ranked in the prestigious League Tables. TRIGON employs more than The Baker McKenzie Warsaw office is particularly proud of 150 experts, including brokers, analysts, investment advisers, its competencies in serving listed companies, including in as well as specialists in M&A, equity and debt markets, and private placements and public offerings of shares and bonds, corporate finance. TRIGON has partnered with leading Polish acquisitions of listed companies, and regulatory matters. It and international financial institutions, law firms, and private regularly advises listed companies, their management boards, equity funds. supervisory boards and shareholders in the areas of corporate governance and disclosure requirements. TRIGON Dom Maklerski is a leading manager of public offerings on the WSE. In 2016, it successfully floated shares Baker McKenzie is one of the most frequently recommended of five companies (including as par of three IPOs) and in 2015 law firms in Poland and worldwide, which is confirmed by the it received the WSE Golden Bull award for the largest number high scores in the world’s most prestigious rankings, including of companies floated on the WSE. In 2014 and 2015, TRIGON Chambers, IFLR and Legal500. TFI was a nominee for ”The TFI of the Year” title awarded by the Gazeta Giełdy Parkiet daily. In recent years, TRIGON Baker & McKenzie Krzyżowski i Wspólnicy sp.k. has been the M&A leader according to Mergermarket, Rondo ONZ 1, 00-124 Warsaw, Poland and in 2014 and 2016 it was nominated to the European Tel.: +48 22 4453314 M&A Award in the ”CEE Financial Adviser of the Year” Email: [email protected] category. www.bakermckenzie.com TRIGON Dom Maklerski S.A. Plac Unii, Budynek B, ul. Puławska 2, 02-566 Warsaw, Poland Tel.: +48 22 330 11 11 Email: [email protected] www.trigon.pl
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This Guide should not be relied upon as a source of legal or financial advice. It was prepared to the highest standards of due care, based on the qualifications, knowledge and expertise of its authors. The information contained in this Guide is correct at the time of publication. The views expressed in this Guide are those of its authors. The solutions available to issuers of securities as presented in this Guide should not be taken as the official views or opinions of the firms or other entities affiliated with the authors. Thus, the authors, consultants and the editorial team assume no liability for any action taken in reliance on any advice or recommendation contained in this Guide.
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