Definition and basics of an IPO An initial public offering (IPO) describes the first-time issue and public placement of shares of a previously private company on a stock exchange. The aim is to raise equity capital from institutional and private investors by issuing new shares or selling existing shares. This transforms the company from a private to a listed stock corporation (AG or SE).

Legal requirements – prospectus requirement and exemptions At the heart of an IPO is the obligation to prepare a securities prospectus in accordance with the requirements of the EU Prospectus Regulation (Regulation (EU) 2017/1129) and the German Securities Prospectus Act (WpPG). The prospectus informs potential investors in detail about the company, its risks, business development and the securities offered. The prospectus must be reviewed and approved by BaFin (German Federal Financial Supervisory Authority). In certain exceptional cases, such as offers to qualified investors or offers with a total consideration of less than EUR 8 million within 12 months, the obligation to publish a prospectus may be waived or reduced.

Admission procedure and requirements of the stock exchange regulations In addition to the preparation of the prospectus, the admission procedure at the respective stock exchange is also relevant. The admission requirements in accordance with the Stock Exchange Act (BörsG) and the respective stock exchange regulations must be met. These requirements include, for example, minimum equity requirements, operational business activities and requirements for corporate governance and transparency of the company.

Compliance after the IPO – ad hoc publicity and other reporting obligations After a successful initial listing, the company is subject to numerous regulatory obligations in the area of capital market compliance. These include, in particular, the ad hoc disclosure obligations pursuant to Art. 17 of the Market Abuse Regulation (MAR), according to which material facts that could influence the share price must be publicly disclosed without delay. Furthermore, voting rights notifications in accordance with Section 33 of the German Securities Trading Act (WpHG) and regulations on directors’ dealings in accordance with Art. 19 MAR must be observed.

Players involved and the IPO process An IPO is a complex, multi-phase process that requires the involvement of various players such as banks (as underwriters), specialized lawyers, auditors and, if necessary, management consultants. The process typically includes an intensive due diligence review, preparation of a prospectus, roadshows to attract investors and pricing processes, for example by means of a bookbuilding procedure.

Advantages of an IPO A successful IPO offers the company access to considerable financial resources, which can be used to finance strategic investments, expansions or company acquisitions. In addition, the company gains visibility and reputation on a national and international level through the stock market listing, which can strengthen the trust of customers and business partners.

Disadvantages and risks of an IPO At the same time, an IPO is associated with high regulatory requirements, which tie up extensive resources and cause ongoing costs. In addition, there is an increased transparency obligation, which smaller or family-run companies in particular may find disadvantageous. In addition, an IPO usually means a certain loss of control by the previous owners due to the integration of new shareholders and the need to comply with capital market regulations.