The French capital market traditionally stands out as a reliable venue for companies looking to secure equity funding for their activities efficiently and to access the European market. In recent years, Euronext Paris has helped raise approximately 25 to 50% of the total equity funding of the six regulated markets managed by the Euronext Group.1
Out of the €3.3bn raised at the group level in 2018, €0.9bn was raised on the Euronext Paris regulated market (“Euronext Paris”) through seven successful IPOs, and €2.4bn out of €3.4bn in 2017.2 2018 was an exceptionally low year in terms of IPOs, mainly due to market volatility, and the fact that four significant IPOs were pulled. Only one large IPO succeeded (Neoen, €697m); the other IPOs, below €50m, were mostly biotech and growth companies.
The French branch of the Euronext Group also manages three other markets: Euronext Growth (ex–Alternext), an organised trading facility (OTF) dedicated to the business development of small to medium-sized companies (in particular, innovative companies operating in the new tech sector) and two specifically dedicated multilateral trading facilities (MTFs): Euronext Access; and Euronext Access+, targeting newly developed start-ups. However, we will solely focus on the IPO procedure for listing on Euronext Paris, unless we specifically refer to these markets for comparative purposes.
Companies seeking to list their shares on Euronext Paris are subject to a number of legal and regulatory constraints, but foreign companies may benefit from several exemptions therefrom. The purpose of this overview will be to give French and foreign companies, and investors alike, an informed idea of what an IPO entails on the Paris market.
A French IPO process typically takes a minimum of two months from the filing of the company’s registration document with the AMF, e.g.
five to six months in the aggregate. The key steps of the IPO process are presented in the diagram below.
The parties need to determine the listing venue (Euronext Paris for France), and can chose multiple listings. They will determine the scope of the international private placement, e.g.
within the European Union, outside of the US (“Reg S” offering) or with a private placement in the US (e.g. under rule 144A).
Once approved by the AMF, the prospectus can be used to conduct a secondary listing or a public offering in any other EU member state (“European passport”).
The offering can comprise new shares, existing shares or a combination of both. The parties will determine the initial size of the offering, which can be increased in two ways.
If the offer is successful, the offering size may be increased by up to 15% at the time of pricing (up to 25% if only secondary shares are offered) provided this option was disclosed in the prospectus (“extension clause”).
IPOs will also generally include an overallotment option (“green shoe option”): after pricing, when allocating shares to investors, the banks will over-allot shares (e.g.
allocating up to 115% of the offering to investors). To cover their short position, the underwriters will be granted the option to purchase up to 15% additional shares issued by the company (but only if new shares are offered in the IPO) or sold by existing shareholders, at the IPO price. This option is valid for 30 days after pricing. If, at closing, the underwriters have not exercised the option, they will borrow shares for delivery to the investors; to repay the loan, they will either purchase shares on the market (thus stabilising) or, if the price is up, exercise the option.
In addition, pursuant to the AMF General Regulation and recommendations, issuers must make their best efforts to satisfy demands from retail investors to a meaningful extent. This objective is deemed to have been met when at least 10% of the overall offering amount is put on the market and made accessible to retail investors. However, if such reserved shares are not purchased by retail investors, they can be reallocated towards institutional investors. In case of oversubscriptions, the AMF may rule to avoid an obvious imbalance in the allocation of securities to the detriment of retail investors.
Retail investors are allowed to withdraw their purchase orders placed online during the entire book-building period.
The company contemplating an IPO must establish a “working group” which typically includes the company’s lawyers, the banks placing and underwriting the offering and their lawyers, the company’s auditors, a communication and public relations agency and, as the case may be, brokers underwriting liquidity contracts and financial/listing sponsors.3 Other parties involved may include potential pre-IPO investors, selling shareholders and their respective advisors (see below, “Anchor/cornerstone investors”).
The company, its main shareholders and, as the case may be, executive officers, will be asked to grant lock-ups in order to avoid additional shares flowing in the market (for a limited duration from 90/180 to 365 days); the lock-up can later be waived by the underwriters (“soft lock-up”).
In accordance with international market practice, a placement and underwriting agreement will be signed with the bank syndicate upon pricing, at the end of the book-building period, pursuant to which the underwriters will agree to procure purchasers for, and failing which will purchase, the offered securities, subject only to closing and market-out conditions (e.g.
absence of certain events such as war, crisis or customary market disruptions).
The company may want to give potential investors early access to the information contained in the draft prospectus and evaluate/assess their interest based on their reactions (“early look”), thus allowing the company to refine its “equity story”. To improve the chances of success, in particular due to the volatility of markets, companies may try to find investors willing to acquire shares before the IPO (“anchor investors”) or to agree in advance to place an order in the book (“cornerstone investors”).
This trend can be seen in large transactions (investors’ pre-IPO commitments amounted to approximately 45% of the offering in the Neoen IPO) or in smaller transactions (see, for example, Bpifrance’s commitments in various tech/biotech IPOs). This requires being able to provide reliable information to these investors early enough in the process, which involves advanced preparation of the accounts and the prospectus. It also raises issues on the scope of the due diligence such investors are allowed to perform, in particular on the business plan: disclosing it to them may require the inclusion of corresponding forward-looking statements in the prospectus.
The registration document (which is the document describing the company – see below, “Legal documentation”) must be published immediately after its final registration with the AMF. The company may decide to postpone publication, but it must be published ahead of the offer period to allow the market to get a better understanding of the issuer (i.e.
no later than five trading days prior to the date the AMF grants its visa (approval) on the prospectus, which is typically the day preceding the launch of the offering). In that case, the company may not disclose material information contained in the registration document to any person not bound by confidentiality, which until recently obliged the company to publish the registration document before holding the analysts’ presentation. However, the AMF has relaxed its doctrine in 2015 and now allows presentations to the analysts of the bank syndicate to be made prior to the publication of the registration document, in line with international practice: analysts may therefore prepare their reports earlier, which reduces the overall duration of the process and improves the chances to take advantage of favourable market windows.
Publication of research reports will be subject to restricted/blackout periods in line with international practice (there are no specific French rules on this issue).
Determination of the share price
The offering can start once the AMF has granted its visa on the securities note which, with the registration document previously registered and the summary, forms the prospectus. The prospectus must at least indicate the maximum price of the offered shares; a price range (which cannot exceed +/-15% around the mid-range price) must be communicated to the market at least three days before the end of the offering period (it is often included in the prospectus for French IPOs). In the event that the final price is above the price range, it must be published. The offering period must be extended by at least two trading days following publication and prior orders can be cancelled.
If the price is set lower than the price range, the price must be published. The offering can proceed (if such possibility was disclosed in the prospectus) unless the other characteristics of the offering are significantly modified. In case of any such significant modification, an additional securities note must be submitted to the AMF for approval.
Listing of the shares
Upon initially listing a company’s shares on Euronext Paris, Euronext will include it in one of the three capitalisation segments: Segment A (more than €1bn); Segment B (between €150m and €1bn); or Segment C (below €150m). Once a year, the composition of the capitalisation segments is modified by taking into consideration the average market capitalisation of public companies calculated during the last 60 days of trading of the previous year.
Listing of the shares will generally occur immediately following pricing (i.e.
the next day), on a “when issued” basis until the closing (two days after pricing).
In its capacity as the French financial markets supervisor, the Autorité des marchés financiers (the “AMF”) safeguards investments, ensures orderly markets and makes sure that markets receive material information; as such, it exerts significant control over an IPO process, in particular with regard to the information contained in the prospectus: it will thoroughly review it and exchange comments with the working group throughout the process, including on legal and accounting matters, until final approval.
Euronext, as the French market operator, approves the admission of the company’s shares on the market it operates. It will review the legal and financial documentation prepared for the IPO, the company business plan, and may require additional conditions (e.g., market capitalisation, shareholders’ equity and/or lock-ups).
The prospectus (which can be, and in France generally is, split into three documents: a registration document containing information on the company; the securities note describing the shares offered to the public; and a summary) must be filed with the AMF for approval. The AMF has 20 trading days following the receipt of a complete dossier to review the prospectus; however, in practice the delay can be longer.
The format of the prospectus is set forth by European regulations.4 This prospectus can be drafted in English.5 However, the prospectus summary will need to be drafted in French.
The AMF General Regulation requires the bank(s) or listing sponsor to issue an attestation (addressed to the AMF) certifying that they have conducted customary due diligences in accordance with the professional code established by the FBF and the AFEI,6 and that the prospectus does not contain any inaccuracies or omissions which could mislead investors. It also requires the company’s statutory auditors to (i) issue reports on pro forma information and forward-looking statements (if any), and (ii) review other information in the prospectus and issue a completion letter (“lettre de fin de travaux”, addressed to the AMF) regarding the financial and accounting disclosures, with their observations, if any. The Company CEO must sign a statement that the information contained in the prospectus is true and accurate, and that also includes any observations made by the auditors in their completion letter. Those requirements only apply to the prospectus for the public offering and listing of the offered shares, as approved by the AMF.
With respect to the international offering memorandum used for the international private placement of shares (which is not subject to AMF review or approval), the auditors will be asked to issue a comfort letter, and the law firms advising the company and the underwriters will be asked to issue legal opinions and disclosure “10b-5 like” opinions, for the benefit of the underwriters, in accordance with international market practice.
The legal framework of European markets and other trading platforms, permanent and periodic disclosure obligations and rules and sanctions applicable to market abuses, are regulated at a European Union (“EU”) level. The Regulation (EU) 2017/1129 of June 14, 2017 (the “Prospectus Regulation”), which will apply in full on July 21, 2019, further standardises the rules applicable to prospectus content and format.7
The main statutory French law provisions are divided into two different codes: the French Commercial Code (FCC), governing essentially the corporate aspects of French public companies; and the French Monetary and Financial Code (FMFC), which sets forth the principles of securities and exchange law.8 Other aspects, pertaining notably to the offering process and reporting obligations, are set forth by the General Regulation of the AMF. The Euronext Harmonized Rules (applicable across all the regulated markets managed by the Euronext Group) and the specific Euronext Rules for Euronext Paris contain the listing requirements and rules.
Furthermore, French listed companies are legally required to adopt their own corporate governance code9 and, as a matter of practice, adopt the AFEP-MEDEF code of best practice standards aimed at improving the quality of a company’s board leadership, effectiveness, accountability, remuneration process and investor relations. French listed companies must set out in their annual report, or in the report on corporate governance annexed to it, any of the corporate governance code’s recommendations that they have not applied and their reasons for not doing so (comply or explain principle). The AFEP-MEDEF code includes the need to have independent directors, an audit committee (mandatory) and, as a matter of best practice, a remuneration and a nomination committee.
Overview of listing requirements
The company intending to publicly list its shares must be either a joint-stock company (société anonyme or “SA”), a limited joint-stock partnership (société en commandite par actions or “SCA”),10 or a European joint-stock company (société européenne or “SE”).11 An SCA is managed by one or several partners who are indefinitely liable for the company’s debts and can only be replaced with their approval (they can be natural persons or legal entities); other shareholders have rights similar to those of an SA. SEs can operate throughout the EU without having to set up a subsidiary in a specific Member State, and can easily move their registered office within the EU; they otherwise follow most rules applicable to SAs.
Furthermore, the company’s articles of association must be modified to comply with all the requirements applicable to listed companies (e.g.
removing all provisions restricting transfer of shares).
The Euronext Harmonised Rules require that at the time of admission to trading, a sufficient number of securities must be distributed to the public (i.e. at least 25% or such lower percentage determined by Euronext (in any event, not lower than 5%, representing a value of at least €5m)).
In order to be listed on the Euronext regulated market, companies must provide three years of IFRS-audited financial statements as well as the most recent reviewed half-yearly accounts if admission is sought more than nine months after close, in accordance with the Prospectus Regulation. From a marketing standpoint, financial information on the most recent quarter will also be required.
Restrictions on communication
Communication pre-IPO is restricted: material information on the company may only be disclosed to persons bound by confidentiality obligations prior to the publication of the registration document, and information on the transaction itself (and in particular, the price and the name of the banks) should not be made public prior to the visa of the AMF on the prospectus, as it could be viewed as a public offering of securities prior to prospectus approval. Furthermore, any other information on the company should be carefully reviewed prior to any publication or disclosure, since the AMF may request its inclusion in the prospectus and the company will incur prospectus liability on any such information.
Promotional documentation relating to the offering, irrespective of form and distribution method (e.g.
press inserts, leaflets, mailshots, internet banners), must be provided to the AMF before being distributed. Any such documentation must mention the existence of an AMF-approved prospectus and their content must be consistent with the information in the prospectus.
Considerations for foreign issuers
- Fast Path procedure for US FPIs
- specific circumstances, Foreign Private Issuers (FPIs) that are publicly traded on the NYSE can benefit from a simplified listing procedure, called the “Fast Path” procedure, which is currently reserved for only secondary listings or private placements.12
- procedure was originally designed to allow FPIs to enter the European market by publicly trading their shares on Euronext Paris and thereby build a shareholders’ base in Europe. The listing process is straightforward, fast and cost-efficient. The prospectus filed with the AMF is primarily composed of the documentation already filed with the Securities and Exchange Commission (SEC), accompanied by a prospectus summary. The filing procedure may be done entirely in English and the overall process can take between five to six weeks. The Fast Path procedure is not dedicated only to US incorporated companies, but to all companies whose shares (either their common stock or American Depositary Receipts (ADR)) are listed on the NYSE.
- 2007, Euronext created a specialised market segment called the “Professional Compartment” intended for direct listings or private placements to qualified investors (e.g.
without public offering).
Initial Public Offerings 2019 | Cayman Islands
Listing formalities and disclosure obligations are simplified.
- Professional Compartment has been used by FPIs for double listings on Euronext Paris via the Fast Path procedure. It has also been used to list special purpose acquisition vehicles (“SPAC”) created for leveraged buy-outs (e.g.
- is, however, limited to qualified investors and other investors to the extent they have been duly informed of the characteristics of this market by their financial intermediaries.
Obligations for the company and its managers
(a) Inside information disclosure
Issuers are required by European regulations13 to publish immediately any inside information and may only postpone publication if: (i) immediate communication is likely to prejudice the legitimate interests of the issuer; (ii) the delay of publication is not likely to mislead the public; and (iii) the issuer is able to ensure the confidentiality of that information. In case of delay, issuers must maintain and update a list of all persons having access to such inside information (insiders’ list). In France, the AMF supervises this process.
(b) Periodic disclosure obligations
Within four months following the end of the fiscal year, issuers are required to make available to the public the annual accounts, the management report, the audit report and the statements of responsibility from the persons responsible with the issuer. Within three months after the end of the first half of the fiscal year, issuers are required to publish their audited accounts for the first half of the fiscal year, a half-year activity report, the audit report for this period, and the statements of responsibility from the persons responsible with the issuer.
As the case may be, the company must inform the AMF if it decides to apply or cease to apply certain provisions of its articles of association applicable during a public offer period (e.g.
Initial Public Offering (IPO) Process
restrictions to the transfer of shares) or to implement a share buyback programme (publication of the description of this programme and seven-day/monthly reporting to the AMF on the transactions relating to such programme).
Companies are also required to publish, on a monthly basis, the total number of voting rights and shares making up their share capital (to the extent these numbers have changed since the last publication).
(c) Managers’ transactions
Pursuant to MAR, persons discharging managerial responsibilities (“PDMR”)14 and persons related to them must report to the AMF any transaction they have carried out on such company’s securities, no later than three business days following the execution of said transaction. This declaration is not necessary when the aggregate value of said transactions does not exceed €20,000 in the course of an ongoing fiscal year.
(d) Closed periods
Pursuant to MAR, PDMR may not directly or indirectly engage, on his/her own behalf or on behalf of third parties, in any securities transactions during a closed period of 30 calendar days prior to the publication of the annual or half-year financial statements. Based on AMF recommendations, public companies can (and most do) extend these closed periods to: (i) persons having routine or occasional access to inside information; and (ii) a 15-calendar-day period preceding the publication of quarterly financial information.
(e) Parity within boards of directors and supervisory boards
Boards of directors or supervisory boards of French listed companies must be composed of at least 40% of each gender. Not complying with this rule may result in monetary sanctions, the temporary suspension of the fees allocated to directors (“jetons de présence”) and the nullity of appointments made by such boards.
Remuneration of senior executives of French listed companies (and in particular, the CEO if he is also chairman of the board) is subject to increasingly strict rules and recommendations. The AFEP-MEDEF code contains a number of recommendations on the criteria to be used. Each annual shareholders’ meeting must approve ex ante the principles and criteria of its remuneration, and also ex post the amounts paid with respect to the previous fiscal year. A draft legislation provides that the government may enact mandatory rules restricting the remuneration of senior executives in connection with the transposition of the EU Directive 2017/828 of May 17, 2017.
Obligations for shareholders
(a) Capital and crossing voting rights thresholds
Shareholders, acting individually or by way of concerted action, crossing upwards or downwards 5%, 10%, 15%, 20%, 25%, 30%, one-third, 50%, two-thirds, 90% and 95% of a French listed company’s capital or voting rights, must inform the company of such crossing, as well as the AMF, which will disclose the information to the public.
Non-compliance with these statutory requirements may result in: the shares exceeding the relevant threshold being deprived of voting rights; administrative sanctions by the AMF of up to €100m; as well as criminal fines of €18,000 for the defaulting individuals (as well as the chairman executive officers and directors of a defaulting company) and €90,000 for the company.
The companies’ articles of association may provide for even lower declarative thresholds, which can go down to 0.5% of the issuers’ capital or voting rights.
Upon crossing the 10%, 15%, 20% or 25% thresholds, the shareholders are legally required to publicly declare to the issuer and to the AMF their objectives for the six-month period following the crossing.
For the computation of such thresholds, all financial instruments or agreements giving access to existing share capital or voting rights (even those which are cash-settled) must be aggregated to shares and voting rights already held.
(b) Mandatory takeover bid
Any shareholder of a French listed company that crosses, individually or by way of concerted action, 30% of the issuers’ capital or voting rights, is legally required to declare a tender offer on 100% of the shares of the company. The same obligation applies to shareholders holding individually or jointly between 30% and 50% of the issuers’ capital or voting rights and who acquire at least 1% during the 12 months preceding the threshold crossing.
(c) Withdrawal offers and squeeze-out procedure
Where a shareholder or group of shareholders acting in concert holds at least 90% of the voting rights of a French listed company, it may make a withdrawal offer for the remaining shares (“offre publique de retrait”) and a minority shareholder may request such withdrawal offer to be carried out.
In addition, when a bidder owns 90% of the shares and voting rights of a French public company after completing any public tender offer, it may secure the compulsory and automatic transfer of minority shareholdings through a squeeze-out mechanism (“retrait obligatoire”).
In addition, the AMF may request a controlling shareholder who transforms the company into an SCA, decides to make certain significant changes to the company’s articles, merges it with a company that controls it or is under common control, transfers all or substantially all its assets, changes its activity or suppresses dividends for several fiscal years, to launch a withdrawal tender offer.
(d) Delisting without squeeze-out procedure
As an alternative to the squeeze-out procedure, the AMF recently approved an additional delisting procedure available to bidders holding more than 90% of the voting rights of the company, following a simplified public tender offer, subject in particular to the low liquidity of the company’s shares. However, the bidder remains subject to certain requirements following the delisting and this new mechanism does not replace the squeeze-out procedure, as it does not allow the controlling shareholder to force the minority shareholders out of the company. In practice, delisting decisions are rare outside the context of a squeeze-out.
(e) Statement of intent following rumours of a takeover bid (“put up or shut up”)
The AMF may require, from any person whom it reasonably believes to be preparing a takeover bid (for instance, where the AMF observes significant and unusual variations in the price or trading volume of a company’s shares), to publicly disclose their intentions within a given timeframe set by the AMF. If the individual discloses that they intend to file a tender offer, the AMF will set a date by which the tender offer must be filed or publish a press release outlining the terms of the proposed tender offer. If the individual states that they do not intend to file an offer, they are prevented from filing an offer on the issuer during a six-month period from the time of the statement, unless evidence is provided affirming that major changes in the environment, situation or shareholding structure of the entity concerned, including the issuer itself, have occurred.
(f) Disclosure of shareholders’ agreements
Shareholders are required to disclose to the AMF, which will publish such disclosure, any clause of an agreement providing for preferred terms for buying or selling shares admitted to trading on Euronext Paris and covering at least 0.5% of the floating capital or voting rights of the company.15
(g) Disclosure of the preparation of a financial transaction
Any person preparing, for its own account, a financial transaction likely to have a significant impact on the price of company’s securities, or on the financial position and rights of holders of such securities, must disclose the characteristics of the transaction to the public as soon as possible. However, if confidentiality is temporarily necessary to implement the transaction and if the person is able to ensure confidentiality, it may do so, and assume responsibility for deferring disclosure of those characteristics.
(h) Rules applicable to foreign issuers
The above requirements generally apply to non-French issuers, including periodic and ongoing disclosures obligations, except for French law provisions which only apply to French companies, such as disclosure of ownership thresholds, mandatory takeover bids, squeeze-out, or provisions which only apply to EU companies such as the obligation to inform the AMF of specific amendment to the company’s articles of association.
Non-French companies, listed or seeking to be listed on Euronext Paris, can prepare their IFRS financial statements in a currency other than the euro (e.g.
Pursuant to MAR, any person who uses inside information to trade listed securities, or unlawfully communicates inside information to third parties, incurs sanctions from the AMF (penalty of up to €100m or 10 times the profits realised) or criminal penalties from criminal courts (fine and/or imprisonment).
AMF approval does not constitute an endorsement of the merits of the offering or the authenticity of the accounting and financial documents presented. The prospectus is prepared by the issuer and its signatories, which incur liability in respect thereof.
Sanctions by the AMF
The AMF may sanction the company’s authorised representatives, the statutory auditors or the listing banks, for any violation of its General Regulation or European Regulations which fall under its competence, to a monetary penalty of up to €100m. In particular, their liability will be sought on the basis of misleading or inaccurate information contained in the prospectus, and more generally in any communication.
The CEO and directors are responsible, individually and separately, as the case may be, for any breach of applicable laws or regulations or the company’s articles of association, or any fault in managing the company. Third parties may sue the company, in particular when a director or the CEO have committed a fault which causes a prejudice to the company; the company may in turn exercise recourse against the defaulting director(s) or CEO, such recourse being made by the company itself or at the request of its shareholders.
Third parties may sue directly directors or the CEO if: (i) the fault of the director or CEO which causes a prejudice to the company is intentional, serious and falls outside the scope of the normal duties of the directors or CEO; or (ii) the fault causes a prejudice directly to the third party, which is distinct from a prejudice to the company.
In the last few years, there has been a steady trend towards rendering the French market increasingly attractive for domestic and international companies; market operators show optimism with regard to the IPOs announced for 2019, and anticipate better results than those recorded for 2018. Important legislative reforms have been adopted with a view to encouraging more companies to go public on Euronext Paris (e.g.
reduction of the delisting and squeeze-out threshold from 95% to 90% of the floating share capital and voting rights). The recent “Pacte Law” enables French companies seeking to be listed only on certain foreign markets outside of the EU (for example, on the NYSE), to directly list their shares without using depositary receipts (such as ADRs).
- The Euronext Group, based in Amsterdam, manages six regulated markets: Euronext Amsterdam, Euronext Brussels, Euronext Dublin, Euronext Lisbon, Euronext London and Euronext Paris.
- Source: Euronext.
- For companies going public on Euronext Growth, Access or Access+, it is mandatory to appoint a listing sponsor accredited by Euronext in order to increase the investor’s confidence during the listing process.
- Annex to the Commission Delegated Regulation supplementing the Prospectus Regulation.
- For example, this possibility has been used in 2018 by GEFCO, Consolis, Navya and Autodis.
- The Code professionnel FBF-EFEI details those customary due diligences (Diligences à opérer par les prestataires de services d’investissement participant à une opération financière).
- This article sets out the applicable rules as modified by the Prospectus Regulation.
- A draft legislation provides to regroup all the corporate aspects relating to public companies into a single new book of the FCC (the provisions pertaining to public companies are currently intertwined with those governing the private sector).
- It should be noted that non-French companies listing in France (as well as French companies listing outside of France) are not subject to this requirement.
- Very few public companies are SCAs, for example, Hermes International or Michelin.
- For example, LVMH, Wendel, Schneider Electric or Dassault Systèmes.
- Companies that have used this procedure include Coca-Cola Enterprises, Eli Lilly and Company, Infosys or Weatherford International.
- Regulation (EU) No 596/2014 of 16 April 2014 on market abuse (Market Abuse Regulation or “MAR”).
- As defined in MAR.
- Within five trading days from the signature of the agreement or the inclusion of the clause.