New Guide on Going Public on SIX Swiss Exchange

In late 2011, SIX Swiss Exchange published a comprehensive guide on Going Public on SIX Swiss Exchange. The guide is the product of a collaboration among some of the leading banks, law firms, audit companies and PR consultants in Switzerland, and provides valuable and interesting in-depth information for companies that are considering going public on SIX Swiss Exchange. The guide has a clear structure and short, but informative, articles complemented with helpful tables and overviews on all important topics that need to be considered in connection with a listing process.

By Till Spillmann (Reference: CapLaw-2012-1)

Under the leadership of the SIX Swiss Exchange, the leading Swiss investment banks, the leading Swiss law firms, as well as two of the big four audit firms and PR consultants have issued a comprehensive guide on going public on SIX Swiss Exchange: Going Public on SIX Swiss Exchange. The guide is free to download at SIX Swiss Exchange’s website. The reference contains valuable information for companies that are considering going public, as well as financial, legal and tax advisers on the process of listing and going public on SIX Swiss Exchange.

The publication provides detailed information on the entire process of a listing, everything from the evaluation through the preparation phase, through the marketing, and finally considerations on the aftermarket.

The guide starts with a preface by Johann Schneider-Ammann, Federal Councilor and Head of the Federal Department of Economic Affairs, who emphasizes that not only is Switzerland one of the most competitive economies, but is also one of the most attractive places in the world to do business. In particular, he underscores Switzerland’s appeal as a location for businesses due to a combination of mutually reinforcing factors, including: innovation, excellent infrastructure, access to a highly skilled workforce, easy access to authorities, and a well-functioning financial market. The preface is followed by further introductory contributions by the Chairman of the Swiss Association for Location Management, and words of welcome from the CEO of SIX Swiss Exchange, both of whom further stress the advantages of the Swiss financial market, and the SIX Swiss Exchange, in particular. Christian Katz, the CEO of SIX Swiss Exchange, offers an overview of the reasons why he believes the SIX Swiss Exchange is just the right place for a company to go public. Apart from the fact that SIX Swiss Exchange is among the largest stock exchanges in terms of capitalization of its listed companies, he aptly points out that it also enjoys high visibility and recognition of the listed companies among international investors, analysts and the media. He also highlights the unique regulatory regime of self-regulation in Switzerland which enables SIX Swiss Exchange to ensure a smooth and fast listing process through its independent division SIX Exchange Regulation and to be close to the market and its needs.

Apart from these introductory contributions, the IPO guide is divided into the following four sections: Why consider an IPO; Preparation; Marketing and The Aftermarket.

1) Why consider an IPO?

The main section of the IPO manual begins with the question why a company should consider an IPO. The authors underscore that the predominant motivation for a company to go public is to get access to the public capital market. In addition, a diversified investor base, enhanced funding flexibility and the option to set clear market signals make an IPO one of the most attractive forms of financing. On the other hand, it is also noted that an IPO involves considerable additional costs, not only in relation to the IPO process itself, but also due to higher costs associated with increased investor relations maintenance and ongoing obligation requirements from the stock exchange.

2) Preparation

The second part of the guide deals with preparation work and, apart from setting out the prerequisites for a successful IPO, contains an IPO readiness check with a helpful introduction on what going public really means for a company.

Numerous articles offer valuable in-sights into the various preparatory works and aspects that should be taken into account, ranging from the process timeline, pre-deal research, capital structure, corporate governance, valuation, the investment case, the structure of the IPO, and the importance of investor relations and public relations. The section also contains interesting articles on how to manage risks, directors’ and officers’ liability insurances, tax structuring and due diligence defense. Additionally, the reader can learn about the content and the purpose of the offering document, as well as the main legal agreement on the basis of which the shares are underwritten and offered to investors in Switzerland and abroad, i.e. the underwriting agreement.

The section contains a detailed description of the listing process of Wheatherford International Ltd. This 2010 case study is particularly illustrative since numerous issues arose in connection with its listing process because Weatherford had redomiciled from Bermuda to Switzerland in 2009. With the redomiciliation, Wheatherford not only aimed to reinforce its Swiss presence for tax reasons, but also to elevate its corporate profile across Western Europe. Originally, Weatherford was listed on the NYSE. It then undertook a cross listing on NYSE Euronext in 2009 and completed its stock exchange presence with a dual primary listing on SIX Swiss Exchange in November 2010, all done to broaden its European investor base and to increase demand and trading volumes in its shares. The study touches on, inter alia, the tackling of high demand from index tracking funds and the compilation of selected financial data inasmuch as Weatherford’s track record as a Swiss company was not in line with the minimum track record requirement of three years for companies that want to list their shares according to SIX Swiss Exchange’s Main Standard.

3) Marketing

The second section of the guide deals with topics surrounding a company’s investment case and a typical IPO marketing campaign. The great importance of well-prepared marketing activities to make an IPO a success is underscored not only when it comes to demand creation, and the achieving of a good price for the shares in the offering, but also in connection with the investor base and the positioning of a company post-IPO.

Along a typical timeline of a marketing campaign, the articles in this section touch on how to prepare and market the investment case; the analyst presentation; pilot fishing and the anchor investor process; investor education; all followed by the price range setting, the management road show and the bookbuilding which is concluded by the pricing and the allocation.

As shown in this section of the IPO guide an important element is the analyst presentation, i.e. the presentation of the company’s management to the syndicate equity research analysts with the objective to educate the analysts on the company’s investment case. The presentation kicks-off the preparation of the pre-deal research reports by the independent syndicate equity research departments. These reports contain a whole array of information on the company, e.g. a description of the company’s business, its positioning, competitors, and most importantly, a section on valuation which contains a key document used during the investor education process. Additionally, together with feedback from the analyst presentation, pilot fishing or anchor marketing presentations give the company valuable information in order to decide on go/no-go for the publication of the intention to float, as well as the determination of the price range.

The section concludes with the 2010 Orior IPO case study. It contains an overview of Orior’s equity story and how Orior positioned itself prior to the IPO. This case study provides interesting insights as to when and how demand was created during the bookbuilding, and the simultaneously organized road shows and one-on-one meetings with investors. A summary of the offering terms complements the case study.

4) The Aftermarket

The forth section of the IPO guide is divided into two sub-sections: Obligations of a Public Company and Liquidity in the Market.

The first part of the section offers an overview of the ongoing obligations of a listed company as opposed to the regime applicable to private companies. It touches on regular reporting obligations, such as annual and biannual financial reporting obligations, the annual reporting on corporate governance as part of the annual report, as well as the duty to report potentially price-sensitive information according to the rules on ad hoc publicity. Furthermore, it offers a short introduction to the obligations under the management transaction regime that requires directors and managers to report their transactions in securities of the listed companies. Additional articles provide information on ownership reporting of shareholders, corporate governance, the public takeover regime and more technical considerations about registered shares and share ownership mechanics. The section is complemented by a contribution on shareholder activism highlighting the reasons, potential goals, instruments of the various types of activist shareholders and how companies can mitigate the risk of becoming a target of activist shareholders.

The second part of the section touches on aspects surrounding liquidity in the market, and provides useful introductions to share buy-backs, secondary sales and the capital raising by public companies. Interesting insights are provided on the importance of liquidity and how liquidity can be maintained at a high level and what investors generally expect from a company listed according to the Main Standard of SIX Swiss Exchange.

In a nutshell, the IPO guide shows that listing continues to be one of the most important sources of equity financing for companies looking to secure independent growth for the future. With its globally networked, financially powerful and efficient capital market, the guide also underscores that Switzerland and SIX Swiss Exchange offers ideal conditions for a listing.

It is fair to say that SIX Swiss Exchange’s IPO Guide Going Public on SIX Swiss Exchange is an excellent publication and a very helpful tool for companies considering an IPO, as well as financial, legal, tax and PR advisers. It offers valuable insights from market participants who are at the forefront of helping companies seeking to go public. The guide has a clear structure and contains a number of short and informative articles, complemented with helpful tables and overviews on all important topics that need to be considered in connection with a listing process. The publication underpins the professional and, at the same time, pragmatic approach authorities, advisers and other market participants generally require when helping companies to go public on SIX Swiss Exchange. Clearly one of the competitive advantages for which Switzerland and its financial centre is best known.