Process within which a private company issues new shares (a capital increase) and/or offers existing shares to new investor through listing on the capital market(s).

• The company’s shares are already listed and traded on the capital market and it wants to raise new capital as an alternative solution to finance future growth – so called SPO or secondary public offer.
• Listing of existing shares made by a private company with attractive business case.
• The combination of both capital increase and sale of existing shares to execute a partial exit of current shareholder/s.

• Skepticism concerning Czech capital markets, experience of voucher privatization of early 90’s.
• Confusing regulatory and legal environment.
• General understanding of IPO as a less efficient source of financing compared to other alternatives (strategic partnership, private equity, etc.) and bank finance.
• Few suitable candidates for IPO etc.
• Little or no support of government has been provided to capital markets; Czech government never privatized public company since the voucher privatization in the most transparent way through capital markets.
• The Czech Republic is lagging behind its neighbouring countries in reforming the pension systems that results into weak institutional investor base (pension funds).

• The situation has changed today:
  • Market Liquidity has been steadily improving over the last 10 years (average daily trade value CZK 1.8bn in 2009),
  • Ten new stock has been listed on the PSE between 2004 and 2010, out of which 6 IPOS had a primary element,
  • There are ca 40 institutional investors and ca 70,000 retail investors in the Czech Republic.
• 2008-2009 global economic slowdown has proven to be the best promoter of capital markets towards companies‘ owners, asset managers, equity brokers, regulatory authorities and the state to exploit the alternative ways of financing.

• Strong corporate governance, transparency, successful and profitable business operations and financial health of the company are key prerequisites.
  • The IPO story should be built on the market position, branding, growth potential and robust management etc.
• Preparation for the transaction takes 1 – 3 years.
• How to prepare successfully for an IPO:
  • Right structure of the company, IFRS financials and minimum 3 years historical financial statements, business, strategy, improved processes and public PR,
  • Preparedness to post-IPO „life“ of the company under public scrutiny.
• How to prepare successfully for an IPO:
  • Know pros and cons,
  • Understand objectives and steps in the process,
  • Detailed planning and timing of the issuance,
  • Well coordinated team,
  • Right IPO story.
• Be ready to take advantage of the market window
  • Approx. 3 – 6 months for preparation of the documentation and placement of the issue,
  • The opportunity may come unexpectedly … or may not come for a long time.
• Successful after-market management
  • The medium term objective to increase shareholder value and satisfy the IPO investors to motivate them to increase their stake,
  • Quarterly reports to investors,
  • Professional Investor relations management.

• +   Raise money for business expansion
• +   Provides for market valuation of the issuer
• +   Increase the value for shareholders
• +   Financial leverage improvement/decrease – better market position and credibility of the company
• +   Improve recognition of the company in the market, PR for free; improved image
• +   Increased attractiveness for highly qualified employees that may be motivated on the share price growth
• +   Reference shareholders may control the management of the company with a relatively small equity holdings (significantly lower than 50%)

• -   More expensive source of capital
• -   Hostile takeover risk
• -   Possible limitation of management flexibility – more decision levels
• -   Limited ability to take advantage of strategic partnership (know how, markets, technology)
• -   Regular reporting, public control
• -   Continuous pressure on financial results and never-ending benchmarking to competitors and the market generally – investors focus on Earnings Per Share
• -   Market volatility
• -   Profit sharing with minority shareholders via dividend payout

• Audit and Accounting Costs
• Legal Costs
• Management Costs
• Cost of the issue
• Altogether between 2-7% of the issue size

• Czech Republic
• Slovakia

•  Belgium, France, Poland, Hungary, Romania, Bulgaria, Germany, Slovenia, Serbia, Montenegro, Bosnia & Herzegovina, Macedonia, Russia, Ukraine, the Baltic states, United Kingdom