Flotations on the London Stock Exchange

1 Day In-House Training Course

This 1-day, in-house training course covers the preparatory, marketing, regulatory and legal requirements for arranging and implementing an international equity offering. Participants will receive practical and detailed guidance on all stages of the process.

An international equity offering is discussed from a company’s point of view as well as from the perspective of the investment bank responsible for the flotation. A decision on whether to bypass a company’s local market is considered along with the prospect of combining a domestic public offer with an international private placing or, for larger companies, planning simultaneous public offers in several countries.

Particular attention is paid to the formulation of the investment case underpinning the attractions of a proposed flotation and to the subsequent marketing, bookbuilding and pricing of the shares to be offered.

Course Outline

  • Introduction

    • Reasons for a listing – objectives & results
    • Advantages and disadvantages – financing growth vs. greater accountability
    • Suitability for quotation – satisfying investors and the regulators
    • Contents of a prospectus – balancing the objectives
  • UK Offers

    • The regulatory framework – the EU Prospectus Directive
      • FSMA, FCA, UKLA, LSE – an alphabet soup
    • The Purple Book – listing particulars for an IPO
      • Business activities – acceptable type & duration
      • Directors – do they have appropriate experience?
      • Controlling shareholders – is the board independent?
      • Transferability of shares – rules and guidelines
    • Fixed price public offers & placings – offers for sale and for subscription
  • Simultaneous US Offers

    • Public offers – the registration statement & Form F-1
      • Regulation S-X – form & content of prospectus
      • SEC Review – what to expect
      • Comment letters – clarification & additional information
      • Pre-filing – prior to filing the registration statement
      • The Red Herring & expressions of interest – initial marketing
    • Exemptions from US regulations – private placements
      • Rules 144 & 144a – objectives & differences
      • QIBs – sophisticated investors
      • Fungible securities – like orange juice
      • Regulation S, Rule 10b-5 – offers to US residents
      • Ongoing disclosure requirements – Rule 12g3-2(b)
  • Preparation for Flotation

    • Pitching for the business – the investment banker’s pitch book
    • Essential criteria for selecting the lead bank – what to look for
      • Reputation – track record
      • Respected analyst – an essential ingredient
      • Distribution capacity – the sine qua non
      • Conflicts of interest – early identification
    • Considering the mandate – a two way assessment
    • The lead bank’s initial decisions – establishing the objectives
      • Directors’ questionnaires – know you client
      • Proceeds of the issue – split between old and new money
      • Responsibilities – key dates for the timetable
      • Choice of stockmarket – domestic only or international
      • Type of offer – size, type of securities, amount, timing
  • The Lead Bank's Responsibilities

    • Orchestrating the issue – global co-ordinator & bookrunner
      • Equity capital markets department – principal contact with the company
      • Relationship manager – often the original contact with the company
      • Research & sales departments – relationship with potential investors
      • Syndicate desk – only concerned with completing the deal
    • Grooming & separation issues – preparing the company for flotation
    • Due diligence & verification – an ongoing process
    • Managing conflicting interests – three conflicting objectives
    • Valuing the company – DCF & comparables
    • Considering the investment case – why should investors buy the shares?
    • Syndication – purpose, structure & participants
    • Transaction management – meticulous preparation and execution
  • Managing the Flotation

    • Board approval – launchpad for further activity
    • Marketing strategy – European & US rules and other countries
    • Marketing – the nature & objectives of the roadshow
    • Equity research analysts – research reports & pilot fish
    • Bookbuilding – provisional orders & bidding strategies
    • Pricing & underwriting – deciding on the optimum price
    • Launching the issue – taking firm orders
    • Structuring the shareholder list – if you want loyalty, get a dog
    • Ensuring a successful flotation – shares must trade at a premium
      • Stabilisation & the Greenshoe option – legal share price manipulation
      • Lock ups – preventing early insider sales
    • Fees & costs – what to expect
    • Post flotation – the real work begins

Course Notes, Slides and Exercise

Participants will receive a booklet containing copies of 14 slides and 70 pages of very comprehensive notes. Each slide will cover a number of related topics and the accompanying notes will support the content of the course to be delivered by the trainer.

During the course of the day, participants will undertake one or two exercises (problems) in groups of two or three (depending on the size of the class) which will involve considering what advice should be given to a client in particular circumstances. Participants will discuss the exercise with each other and then with the trainer and will receive a written answer to the problem.

Exercise 1

Your client has decided to float his company on the London Stock Exchange. It has been agreed that the directors may sell 10 per cent. of their holding as part of the flotation. You advise on how many new shares need to be issued to raise the cash required to fulfil the company’s development plan. You then calculate the enlarged share capital, the projected market capitalisation and a pro forma PER assuming repayment of debt.

Exercise 2

Your client’s stockbrokers have agreed to underwrite a rights issue. You calculate how many shares will need to be issued at the discounted price to raise the required funds, compute the theoretical ex-rights price and comment on how shareholders can deal with their rights.