Chapter 44
FINANCIAL MANAGEMENT : Initial public offerings (IPOs)


An IPO is a complex process that generally takes around six months to complete. During the preparation phase, the whole of the company’s legal, operational and financial structure has to be reviewed, its corporate governance needs to be adapted, financial statements may have to be drawn up in line with the relevant accounting principles and a strategy has to be defined in the form of an equity story for the market.

A company is generally listed in its country of origin. The choice of the market segment on which the company will be listed will be determined by the size of the company and by any constraints weighing on it.

The number of shares offered on the market will depend on the sizing of the IPO, and whether the shares will be shares sold by existing shareholders and/or new shares in the company’s capital that are issued at the time. This will depend on the financial needs of the company,

the shareholders’ desire for control and their liquidity needs, and market constraints.

At the time of the IPO, shares are generally sold on the market at a discount compared with the first listed price. Different theoretical explanations, based mainly on information asymmetry, have been put forward to explain this.

IPOing a company is a complex process and success cannot be taken for granted. Even at the last minute, a forced postponement or a cancellation may be necessary.

SPACs are an increasingly popular form of stock market listing. It involves an unlisted com- pany acquired or merging with an ad-hoc structure with no activity that has gone public a few quarters earlier with this objective.

Delisting may be a good option when the company no longer requires funds or when liquidity has become too low. Delisting can also be a complex process and an independent expert has to be brought in to draw up a fairness opinion on the squeeze-out price.