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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?
IPOs can be made either for existing shares or for newly issued shares. An offering for existing shares only will generally be deemed more difficult to market, as it signals that the company does not require capital to grow, but that the transaction's only purpose is to make it possible for existing shareholders to offload their shares in the company.
Underwriters may also agree to a ‘best efforts’ distribution or to a ‘bought deal’, in which they assume the full risk of placement. Bought deals are rare in Switzerland; best efforts underwritings are the norm.
Procedure and timeframe
What is the procedure and typical timeframe for launching an IPO?
An IPO is generally preceded by a public announcement of an intention to list, at which point a listing application (including a draft of the listing prospectus) is generally submitted to the relevant stock exchange by one of the issuer's advisers, which needs to be authorised by the relevant exchange to that effect. Under the rules of SIX Swiss Exchange, the listing application must be submitted at least 20 trading days ahead of the contemplated book building process. The rules of BX Swiss require that the listing application be made at least 10 trading days ahead of the contemplated first trading day.
After the announcement of the intention to list, the issuer will generally amend its organisation documents (articles of association, bylaws and equity plans) to adjust its structures to the requirements applicable to public companies. In parallel, it will conduct road shows to market the transaction. Once the prospectus has been approved by the relevant stock exchange, the issuer will publish a preliminary version of that document, including a price range for the offering. The lead managers of the transaction will then collect declaration of interest from potential investors through a so-called ‘bookbuilding process’. After completion of that process, the issuer and the lead managers will set the final price and size of the offering and allocate the shares. The issuer will then issue the relevant shares before the first trading day.
What due diligence is required and advised in the IPO process?
No specific due diligence is required by law ahead of an IPO. However, since the authors of prospectuses and similar market documents may be held financially liable for the losses incurred by investors as a result of the inclusion of inaccurate or misleading information in such documents, extended due diligence regarding the financial situation, business activities, results and prospects of the issuer is advisable.
Pricing and allocation
What rules and standards govern share pricing and allocation in the context of an IPO?
Swiss law does not impose particular requirements regarding the pricing of an IPO, except that the relevant shares cannot be issued below their par value. Similarly, Swiss law does not impose specific methods for the allocation of the offered shares. Guidelines issued by the Swiss Bankers Association, which the Swiss Financial Market Supervisory Authority considers to be a minimum standard in terms of conduct of business for Swiss regulated firms, require that the allocation be made on the basis of objective criteria and be not arbitrary. The guidelines further prohibit quid pro quo arrangements for the allocation of shares.
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