IPO: every entrepreneur's wet dream?
Over the past three years, 830,000 Belgians have traded on the stock exchange. And in the first lockdown, up to 5 times more BEL20 shares were traded than before the crisis. Have you ever thought about going public? Discover the advantages and disadvantages of your company going public and how an IPO works.
Why do companies go public?
You probably know the largest Belgian listed companies: they include AB InBev, KBC and Umicore. You undoubtedly also read in the newspapers that Club Brugge had plans to go public in early 2021, but eventually backed out due to a lack of interest among investors.
But why do companies go public?
- To attract additional growth capital: most companies take their chances on the stock market to raise a lot of fresh capital. Shareholders sell some of their shares on the public market. With the extra financial resources, they can, for example, develop new products, expand their activities or explore foreign markets.
- Prestige: an IPO results in a great deal of publicity. Just think of the announcement of Club Brugge, or the buzz around Antwerp chemical distributor Azelis, which has been listed since September 2021.
- Cash in: a third reason to go public is to cash in on shareholdings. In this case you don’t raise money to develop your business, but to earn money yourself.
Did you know: if you want to go public, you can decide which shares are listed and which are not.
What is an IPO?
IPO stands for initial public offering and is also referred to as initial offering. It is the moment when companies go public for the first time. The Euronext Brussels home page shows which companies recently launched an IPO. These newcomers were allowed to ring the stock bell that day. However, they have to go through a long process to get to this point.
The (long) route to going public
What’s the process when you decide you want to go public?
- Choose an investment bank: invite several investment banks to explain your stock exchange plans. One of these banks will act as an intermediary between you and the potential shareholders. They are referred to as underwriters.
- Draw up a prospectus: if you want to go public, you must have concrete growth plans. And these plans are revealed in a prospectus. It also contains a detailed analysis of your company, with information about your assets, financial position and financial prospects.
- Submit your application for a stock exchange listing: you submit your application, including the prospectus, to Euronext Brussels. The Financial Services and Markets Authority, the Belgian stock exchange watchdog, will also examine your file and you receive an answer within 30 days: an approval, a rejection or a request for additional clarification.
- Negotiate with potential shareholders: at the time of filing, the IPO marketing machine starts. Your investment bank will actively look for potential investors. You will know immediately if and how much interest there is, and have an estimate as to what price the investors are willing to pay.
- Publication by Euronext: has your stock exchange listing been approved? Euronext will publish a notice with the IPO date, information about the shares on offer and the conditions for potential investors. Trading can start.
Certainty first, then a stock exchange application
Going public is an intensive and costly process. You need to be prepared to disclose all your financial data. Information about your turnover, profits and managers’ salaries and bonuses will be publicly available – also to your competitors, customers and employees. You also have less control over your company. And you have many administrative and accounting obligations. In other words: going public only makes sense if you know in advance you will raise a lot of money.