LISTING IN ITALY An Overview MICAELA CAPELLI Director Gabelli Value for Italy SPAC MailUp Bergamo, 2 December 2019
Agenda Italian Markets and Going Public The Listing Process 2
Capital Markets • Initial Public Offering (IPO) Primary Market • Underwriting • Nomad on AIM Italia Advisory, structuring and • Rights issues and convertible stock placement selling capacity Secondary • Private Placement for extraordinary Market • Underwriting finance deals for domestic and foreign clients • Tender offers and Delisting • Investor relations programs Advisory to Listed • Stock grant plans Companies • Fairness Opinions • Market specialist on MTA, MAC, AIM Italia, MIV 3
The Italian Stock Exchange: Markets and Segments SeDeX IDEM ExtraMOT MTA ETFplus MOT Borsa Italiana Borsa Italiana Borsa Italiana Borsa Italiana Borsa Italiana Borsa Italiana Star Borsa Italiana MTA International ExtraMOT PRO Borsa Italiana MIV Borsa Italiana AiM Italia MERCATO ALTERNATIVO DEL CAPITALE SOURCE: Italian Stock Exchange 4
Segmentation of Equity Markets • European-standard regulated market Regulated Markets • FTSE-MIB index companies selected by capitalization and liquidity criteria • Closed-end • High quality and transparency investment funds standards • Investment companies • Strict requirements in terms of • Real estate information, transparency, corporate investment companies governance and liquidity • SIV • 40 mn /€ < Capitalization < 1.000 mn /€ Non Regulated Markets (MTF) • MTF • Inspired by the British market model of LSE • Simplified admission requirements • [Institutional Investors] SOURCE: Italian Stock Exchange 5
The Buy Side – Investors on the Italian Market Evolution of Ownership of Italian Market Capitalisation Public Sector Individuals Holdings Foreign Investors Institutional Investors Banks Bank Trusts • A strong weight of retail investors accounts for market liquidity. • Italian markets boast one of the highest rates of retail investors in Europe (26.6% in 2003 vs 8.5% France; 16.1% UK; 38.1% USA). • By the end of 2011, 18%+ of Italian market cap is still owned by Italian families. SOURCE: Italian Stock Exchange 6
Listing Requirements in Italy MTA STAR Segment AIM Italia Minimum Float 25% 35% 10% Audited 3 3 1 (if available) Fin.Statements Offer Institutional / Retail Institutional / Retail [Institutional] Documentation Prospectus/MIS/Business Plan Prospectus/MIS/Business Plan Admission Document Market Cap (€) Min € 40 mn Min € 40 mn – Max 1 bn No formal requirement Corp. Governance - Recommended Mandatory No formal requirement BoD (indep.) Specialist No formal requirement Mandatory Mandatory Investor Relations Recommended Mandatory No formal requirement Website Recommended Mandatory Mandatory Main Advisor Sponsor / Global coordinator Sponsor / Global coordinator Nomad Price Sensitive Mandatory Mandatory Mandatory Information Tender Offer Rules Mandatory (TUF) Mandatory (TUF) By-laws Annual and Semi- Mandatory Mandatory Mandatory Annual Reports Quarterly Reports I-III Q (unaudited) I-III Q (unaudited) No formal requirement w/exceptions 8
Listing Authorities in Italy • Authorisation of Public Offers (Prospectus) • Management of Listing Procedures • Surveillance on transparency of corporate • Info diffusion (“ Avvisi di Borsa ”) info • Organisation and Regulation of Markets • Surveillance against insider trading and • Surveillance on price sensitive price manipulation information (trading halts) • Ruling of Tender Offers GUARANTEE OF MARKET QUALITY PROTECTION OF INDIVIDUAL INVESTORS (private company) (state authority) • Guarantees correct behaviour by securities market Assesses whether the situation of the issuer makes admission contrary to the interest of investors, with participants respect to: • Ensures disclosure of complete and accurate • Balance of financial structure information to the investing public by listed companies • Competitive position • Consistency of business plan 9
Why Do Companies Go Public ? • A discontinuity • A strategic decision • A cost • A growth story COMPANY CONTROLLING SHAREHOLDER PERSPECTIVE PERSPECTIVE • Diversification of financial sources • Diversification of risk • Opportunity to settle M&A • Marketability transactions in stock • Independent evaluation • Enhanced visibility and standing • [Tax issues] (i.t.o. relationships w suppliers/clients, institutions) • Opportunity to launch stock option plans and incentive systems to attract qualified management • Better financing conditions/rating • Administrative and • Volatility of pricing bureaucracy costs • Risk of losing control • Volatility of pricing • Incorrect value diffusion 10
Choosing When & Where to Float Strategic issues and financial markets opportunities are different according to the life cycle stage the company is at. Value Created (ml€) IPO ON MAIN MARKET • Consolidated business • Larger dimensions INTERNAL DEVELOPMENT • Value creation (M&A, stock • Start-up options, etc) • Very small dimensions • Family/founder-owned Time IPO ON AIM PRIVATE EQUITY • • Potential up-side Opportunity of partial exit • • Know-how / management skills New liquidity to finance development projects • • Limited dimensions Lighter requirements 11
Primary Market ISSUER LISTING VENUE INTERMEDIARIES INVESTORS Institutional Investor 1 Alpha Fund managed by Stock Exchange Intermediary1 Beta Asset Mgmt Co. Operator Gamma Bank Institutional Placement Official request Institutional Investor 2 Syndicate to go public Insurance Company Intermediary 2 Regulated Market Delta Brokerage Institutional Investor 3 Company MANDATE ISSUER Global Investment Holding Coordinator Multilateral Trading Facility Prospecuts Intermediary 3 Institutional Investor memorandum Epsilon Bank request for Sir X Public Offer approval Intermediary 4 Syndicate Private Bankers’ MARKET Network SURVEILLANCE Institutional Investor AUTHORITY Sir Y Intermediary 5 Internet Bank Intermediary 6 Retail Bank 12
Players Involved in the Listing Process Issuer The company applying for flotation (Optional) Assists the company in the listing process (i.e. performing an Advisor independent evaluation, helping selecting the Sponsor and Global Coordinator) Mandatory by Italian Exchange Regulations. Appointed by the company for the Sponsor/Nomad INTERMEDIARIES management of listing procedures. Assumes reputational risk of deal and BANKS/OTHER delivers assurances on the quality of the issuer. Must be independent from issuer (i.t.o. financing and shareholding) Co-ordinates and organises the Offer. Lead arranger of the underwriting Global Co-ordinator syndicate for the Global Offer Specialist Broker in charge of market making on the listed securities to grant liquidity. Mandatory on STAR and AIM markets Review of Issuer’s financial statements. Give assurance (comfort letters) on Auditors financial information contained in the Prospectus and Business Plan Legal Counsels Assist the company and banks in legal issues of offer Plans communication and advertising campaign, manages relations with press PR Company Manages and regulates stock markets. Gives/denies admission to listing/ Italian Exchange trading of securities, and performs trading halts CONSOB Gives authorisation for publishing of Prospectus Montetitoli Manages electronic settlement of dematerialised securities 13
Information to the Market Prospectus Equity Research • • For professional investors only For professional and retail investors • Forward-looking statements, financials and • Actual financials and data (historical) estimates • • Drawn by syndicate banks Drawn by issuer and approved by Consob 14
Pricing The valuation of the investment bank that aims at the Global Coordinator PITCH role is necessarily based on a limited knowledge of company. (First encounter – preliminary valuation ) The process is built up through widely recognized evaluation methods, e.g. DCF and market multiples. The output is a valuation range . After a comprehensive analysis of the business plan and the company’s DUE DILIGENCE opportunities, the range is defined more accurately, working out fair value . Before carrying out the offer, the Global Coordinator meets with a selected PRE MARKETING number of institutional investors ( pilot fishing ) and presents the equity story. During the meetings the first feed -back is obtained. The range contained in the Prospectus is usually not mandatory, whereas OFFERING RANGE it represents an official and public valuation. It considers the current market situation on the offering day. One of the most common Italian market practices is the publication of the HIGH PRICE Maximum Price . It is most frequently fixed at the upper edge of the offering range. The final price is calculated upon quality and number of orders collected OFFER PRICE during the bookbuilding phase . 15
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