Listing on a regulated market is a decisive step in the life of a company, often marking a transition to a new dimension of growth and recognition. This process, far from being a mere formality, is a demanding one that subjects the company to a set of strict rules designed to protect investors and ensure the smooth operation of the market. It is a complex process that requires careful preparation and the support of expert advisers. For managers, understanding the applicable conditions and procedures is the first step towards a successful operation, as detailed in our complete legal guide to initial public offerings.
Prerequisites for admission to a regulated market
Before an applicant company can submit a formal application, it must ensure that it meets a number of fundamental criteria imposed by the market operator, Euronext Paris in France. These requirements are designed to ensure that only a company with sufficient solidity, transparency and liquidity can be listed.
Sufficient distribution of shares to the public (free float)
An essential condition is to ensure a minimum liquidity of the shares as soon as they are floated. To achieve this, market rules require that a significant proportion of the capital be distributed among the public. What is known as the free float must represent at least 25 % of the subscribed capital of the class of securities concerned. The purpose of this rule is to ensure that a sufficient number of shares are available for trading to enable a relevant share price to be formed and to limit sharp fluctuations.
However, an exemption from the 25 % threshold may be granted if the market is deemed capable of operating with a lower free float. This is particularly the case when the number of shares distributed is very high. In this case, the threshold may be lowered, but may not be less than 5 % of the capital. This share must also correspond to a value of at least 5 million euros. To assess the free float, shares held by employees are considered to be part of the public, while those held by managers or shareholders controlling more than 5 % of the capital are excluded.
Historical financial statements: requirements and exceptions
A company's credibility on the market is largely based on its ability to demonstrate past financial performance. The issuer must therefore provide annual financial statements, duly audited by a statutory auditor, for the three financial years preceding the application for admission. If the accounts for the last financial year were closed more than nine months before the date set for admission, audited half-yearly accounts must also be published.
In special circumstances, a waiver of the three-year history requirement may be granted. This flexibility may be considered if it is in the interests of the company and investors, and provided that the company provides all the information necessary to enable an informed assessment of its situation. This was the case, for example, with Liberty Surf, which, having been incorporated less than three years before its application, was able to benefit from such an exemption for its market launch.
Additional conditions at the discretion of Euronext Paris
Beyond these objective criteria, the market operator retains sovereign discretion. Euronext Paris may impose any additional conditions on an applicant that it deems "reasonably appropriate". This latitude enables it to adapt to the specific situation of each issuer and to preserve the integrity and reputation of the market. This degree of subjectivity makes the analysis of the application by lawyers and introducing bankers even more decisive in anticipating the expectations of the market authority.
The admission application: content and preparation
Once the prerequisites have been met, the company must prepare and submit a formal application for admission. This stage requires extensive documentation and the coordination of several external parties.
Documentation required (general, financial, legal)
The application for admission to listing is a dense document that must enable Euronext Paris to assess the application in all its aspects. The documentation to be provided is divided into several sections. Generally speaking, the company must send a letter of application formalising its commitment to transparency and ongoing communication. Above all, the application must include the initial public offering prospectusThis document will be approved by the Autorité des Marchés Financiers (AMF). A list of shareholders who have traded in the shares during the year preceding the IPO must also be attached.
From a financial point of view, the application must, of course, contain the audited accounts for the last three financial years and the auditors' reports. From a legal point of view, it is necessary to provide up-to-date articles of association, minutes of general meetings and board meetings for the last three financial years, as well as all documentation relating to restructuring operations (mergers, contributions) that have taken place. For foreign issuers, consular certifications or legal opinions attesting to the compliance of the documents with their national law are also required.
Multiple players: the key role of the introducing banker
Preparing an IPO, which can take several months, is a team effort. The company surrounds itself with its usual advisers, in particular its law firm and auditors, as well as a communications agency to manage relations with the press. The key player in the deal, however, was the introducing banker. As a market member approved by Euronext, it plays the role of orchestra conductor. It is the banker who assists the company in preparing its application, coordinating the various parties involved and advising on the most appropriate procedure and valuation. His expertise is fundamental to the success of the process.
Distribution and initial listing procedures
Once admission in principle has been granted, the shares must be offered to the public in order to reach the required free float threshold. Several procedures, often combining a centralised offer by Euronext and an off-market placement, are used to organise this initial listing.
Firm price offer (FPO): mechanism and allocation
In a firm price offer, as the name suggests, the price of the shares is fixed definitively before the start of the subscription period. Investors place their orders indicating only the quantity of shares they wish to acquire. If demand exceeds the number of shares offered, a proportional reduction in orders is applied. A "service rate" is calculated to allocate the securities fairly. The issuer may provide for a "differentiated" OPF with tranches reserved for certain categories of investors, for example to favour small orders.
Minimum price offer (MPO): price disclosure
The minimum price offer is more like an auction. The issuing company sets a floor price, and investors submit orders indicating not only the quantity they want but also the maximum price they are prepared to pay. The final listing price is then determined by matching supply and demand. Euronext, in agreement with the issuer, defines a price range within which orders will be served, giving preference to the highest price limits. This procedure enables the market to "reveal" the value it attributes to the company.
Open price offer (OPO): price range and guaranteed placement
The open price offer is currently the most common procedure, as it combines the security of a regulated price with the flexibility of adapting to the market. The issuer does not set a single price, but an indicative range. Investors place their orders within this range. At the end of the subscription period, the final price is set according to demand. Very often, the IPO is combined with a "guaranteed placement": part of the offer is reserved for institutional investors via the introducing bankers, while the remainder is offered to the public via the IPO procedure. This structure makes it possible to secure part of the transaction while ensuring wide distribution to retail investors.
Direct listing: procedure without a securities offer
Direct listing differs from other procedures in that it is not necessarily accompanied by a public offering of securities, and therefore by a fund-raising operation. It is mainly used by companies whose shares are already traded on another market, whether a foreign market or a multilateral trading facility such as Euronext Growth. The aim is to obtain an additional quotation line or to transfer trading in their shares to the main regulated market. The first listing is achieved by matching buy and sell orders for existing shares.
The market undertaking's admission decision
The process culminates in the formal decision by Euronext Paris, which retains control of admission to its market, while informing the supervisory authority.
Jurisdiction of Euronext Paris and information for the AMF
The final decision to admit or reject a listing application rests with the Board of Directors of Euronext Paris. However, this decision is subject to certain restrictions. The market operator must inform the Autorité des Marchés Financiers (AMF) of the application at least five trading days before making its decision. The AMF may then make observations that Euronext must take into account. Although the AMF no longer has a formal right of objection, it retains powers of suspension or prohibition when examining the prospectus. Failure to comply with disclosure requirements can have severe consequences, as illustrated by the following examples the AMF's power to impose sanctions.
Deadlines, taking effect and publication
Euronext Paris has a maximum of ninety days to decide on a complete application. Once granted, the admission decision is valid for 90 days, which may be extended once. However, its effective entry into force is often conditional on the success of the offer to the public. In practice, admission only takes effect at the end of the subscription period, once the minimum public distribution requirement has been met. The listing is then officially announced by publication of a notice by Euronext Paris.
Solent Avocats and admission to regulated markets
The road to listing on a regulated market is a major undertaking that radically changes a company's structure and operations. Each stage, from adapting the articles of association to drafting the prospectus, via dialogue with the market authorities, is fraught with complex legal issues. Thorough preparation and high-quality documentation are crucial to the success of the operation.
The assistance of a law firm with expertise in stock exchange law is essential to secure this process. Our team will work with you to structure your project, prepare the application file and ensure that all your communications comply with the law. Backed by our expertise in banking and financial lawOur firm offers strategic advice to help you successfully navigate the requirements of Euronext and the AMF. For an in-depth analysis of your project and tailored support, contact our lawyers.
Sources
- Monetary and Financial Code
- Commercial code
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