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Initial public offerings
What are the most common structures used for IPOs in your jurisdiction, and what are the advantages and disadvantages of each?
In Mexico, there are two common structures used for IPOs:
- a direct offering of the company’s shares on the primary market. The advantage here is that all transactions are controlled and performed directly by the issuer. However, in a bankruptcy event, the shares will be part of any bankruptcy procedure; and
- a Mexican trust, used as a special-purpose vehicle, where the shares in the company are transferred to the trust, which then issues participation certificates. In this case the shares that are transferred to the trust will not be part of the company’s estate and, in case of a bankruptcy declaration from the issuer, will not be part of a bankruptcy procedure. However, all transactions must be performed by the trustee and there is a higher administrative burden.
Procedure and timeframe
What is the procedure and typical timeframe for launching an IPO?
In order to launch an IPO, the issuer must:
- register the securities in the National Registry of Securities;
- file for authorisation of the IPO with the National Banking and Securities Commission (CNBV); and
- file the prospectus and all relevant documents with the CNBV, including legal opinions and audited financial statements.
Depending of the complexity of the deal, the CNBV takes two to four weeks to analyse and comment on the documents filed. After the final versions of relevant documents are filed, securities are listed and traded on the exchange.
What due diligence is required and advised in the IPO process?
Within the due diligence investigation for an IPO, at least the following information should be analysed:
- information regarding the company’s good standing, its bylaws (as amended), its shareholder list and the corporate resolutions authorising the IPO;
- audited financial statements for the last three years, as well as the company’s credit report;
- physical assets and real estate owned by the company;
- IP rights owned by the company;
- a list of employees, including positions, salaries and bonuses covering the last three years;
- collective bargaining arrangements, labour disputes and requests for arbitration undergone in the last three years;
- government licences and permits;
- environmental issues and audits;
- income tax returns for the last five years, as well as any tax audits or settlements undergone in the last five years;
- contracts, agreements and arrangements executed by the company with third parties, including loan agreements, mortgages or pledges;
- all pending or threatened litigation involving the company; and
- insurance coverage regarding the company’s general liability.
Pricing and allocation
What rules and standards govern share pricing and allocation in the context of an IPO?
Standard international rules apply. Issuers should make use of valuation institutions to determine the pricing of an IPO, so they can offer the best price for securities and gain maximum returns. When necessary, the CNBV can perform a valuation, using an independent expert, in order to determine whether the offer price is appropriate.
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