15:30 16:45 - Panel 7 - Azzeka. Equity Markets: Investing Conditions with Buoyant IPO Activity in Europe

Transcription

1 15:30 16:45 - Panel 7 - Azzeka 1 Equity Markets: Investing Conditions with Buoyant IPO Activity in Europe

2 2 Initial public offerings in Europe Jean-Marc DESACHE Christopher MEAD Gide Loyrette Nouel

3 Summary 3 1. A harmonized and stabilized regulatory framework in Europe 2. Access to the Market Prospectus Disclosure 3. The IPO Process in Europe 4. The Market Abuse Directive 5. The Transparency Directive

4 1. A harmonized and stabilized regulatory framework in Europe Achievement of an integrated capital market throughout a set of European Directives 4 The harmonization of the legal framework in the European Union has achieved a high level of integration and competitiveness, particularly in corporate law (European company statute, facilitation of cross-border mergers) and in capital markets. Focus on capital markets: the Lamfalussy process covered all areas of interest for a comprehensive regulatory framework of capital markets: implementing common rules for integrated capital markets (Directive 2004/39/EC on markets in financial instruments («MIFID»)); favoring raising capital on an EU-wide basis (Directive 2003/71/EC of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading (the «Prospectus Directive») together with Regulation EC/809/2004 of 29 April 2004 and the EU Directives harmonizing financial accounts) ; ensuring a secure and transparent environment for the integrated single capital market (Directive 2003/6/EC of 28 January 2003 on insider dealing and market manipulation (the «Market Abuse Directive») and the Directive 2004/109/EC of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (the «Transparency Directive»).

5 1. A harmonized and stabilized regulatory framework in Europe (continued( continued) 5 Achievement of an integrated capital market throughout a set of European Directives (continued) Remaining steps to come are essentially removing the remaining barriers ; implementing and enforcing the existing legislation and enhancing supervisory cooperation

6 2. Access to the market 6 Prospectus Disclosure Requirements Access to the capital markets throughout Europe is facilitated by a harmonized legal framework concerning legal documents (Prospectus Directive) and accounts Prospectus Directive of 4 November 2003 The Prospectus Directive regulates access to the market by laying down principles for drafting a prospectus covering any offer of securities to the public. These principles include: The single passport enables issuers to use one prospectus to make an offering throughout the entire European Union In practice, all pan European offers can be documented in English (accompanied by relevant domestic language summarizes as may be requested in applicable jurisdiction) A single and upgraded level of disclosure throughout the European Union and closer to US standards The level of due diligence requirements has increased with the development of the 144A market and remains high, even without the inclusion of a 144A offering, among the reputable international investment banks and law firms

7 2. Access to the market (continued) 7 AMF (Prospectus Directive) Form 20-F Item 4. Risk Factors 5. Information About the Issuer 5.1 History and Development of the Issuer 6. Business Overview 7. Organizational Structure 8. Property, Plants and Equipment 9. Operating and Financial Review (Management s Discussion) 9.1 Financial Condition 9.2 Operating Results 10. Capital Resources 11. Research and Development, Patents and Licences 12. Trend Information Item 3.D Risk Factors 4. Information About the Company 4.A History and Development of the Company 4.B Business Overview 4.C Organisation Structure 4.D Property, Plants and Equipment 5. Operating and Financial Review and Prospects (Management s Discussion) 5.A Operating Results 5.B Liquidity and Capital Resources 5.C Research and Development, Patents and Licences 5.D Trend Information 5.E Off-balance-sheet arrangements

8 2. Access to the market (continued) 8 AMF (Prospectus Directive) Form 20-F Item 13. Profit Forecasts or Estimates 14. Administrative, Management and Supervisory Bodies and Senior Management 15. Remuneration and Benefits 16. Board Practices 17. Employees Major Shareholders/Related Party Transactions 19. Additional Information Item 6. Directors, Senior Management and Employees 6.B Compensation 6.C Board Practices 6.D Employees 7. Major Shareholders and Related Party Transactions 10. Additional Information

9 2. Access to the market (continued) 9 Prospectus Disclosure Requirements (continued) Harmonization of the accounts in Europe It was crucial to add to the Prospectus Directive harmonized sets of accounts and audit procedures: Europe adopted IAS Financial Data required : Europe compared to U.S. 5 years of selected historical financial data versus 3 years in Europe Capitalization and indebtedness tables MD&A covering operating results, liquidity and capital resources, off-balance sheet arrangements Critical accounting policies Quantitative and qualitative disclosures about market risk 3 years of audited consolidated financial statements Consolidated interim financial statements if last audited annual accounts are more than 9 months old Pro forma financial information when the issuer has made a significant business acquisition Trend information - Profit forecasts or estimates Principal remaining difference is IFRS vs. U.S. GAAP

10 2. Access to the market (continued) 10 Prospectus Disclosure Requirements (continued) Convergence - IFRS and U.S. GAAP The new 8th Company Law Directive on statutory audit dated as of 17 May 2006 imposes standard audit procedures SEC and CESR published a joint work plan in August 2006 that will promote: the development of high quality accounting standards around the world the avoidance of conflicting regulatory decisions on the application of IFRS and U.S. GAAP SEC/CESR next steps: share views on future development of IFRS and U.S. GAAP endeavor to move toward eliminating the need for foreign private issuers filing reports in the U.S. to reconcile IFRS financial statements to U.S. GAAP by 2009

11 2. Access to the market (continued) 11 Prospectus Disclosure Requirements (continued) Management and underwriter responsibility European Union Towards management certification in Europe No E.U. underwriter responsibility for disclosure: National rules of the AMF requires however a statement of underwriters to the effect that the due diligence performed has not lead them to believe that the prospectus was materially misleading to investors Comparison with the U.S. Management Responsibility for Disclosure Sarbanes-Oxley Section 906 The relevant report fully complies with the requirements of the U.S. Securities Exchange Act of 1934, and the information set out therein fairly presents, in all material respects, the financial condition and results of operations of the issuer Sarbanes-Oxley Section 302 Covers disclosure controls and procedures, and internal control over financial reporting Sarbanes-Oxley Section 404 Management's report on and assessment of internal controls over financial reporting Attestation report by the issuer's auditors on management's assessment filed with the annual report Underwriter Responsibility for Disclosure. Section 11, Rule 10b-5 Availability of a due diligence defence

12 3. The IPO Process 12 Timeline of the IPO process is continued for between 3 and 6 months and is relatively predictable Contents of a prospectus: a registration document (which contains the information relating to the issuer), a securities note (which contains the information relating to the securities offered), and a summary note The prospectus may be drawn up as a single document or separate documents. In practice, most issuers draw up separate documents.

13 3. The IPO Process (continued) 13 Gun jumping issues European Union No specific E.U. requirements, national rules may apply : e.g. in France, the AMF requires that the financial analysts meeting take place only after the registration document is approved by the AMF so that the public receives the same level of information as the financial analyst at the same time Comparison with the US Rule 137 Non-offering participants may publish research in connection with a registered offering Includes coverage of non-reporting issuers Rule 138 Offering participants may publish research on an issuer's debt securities if the issuer is offering equity, and vice versa Applies to registered, Rule 144A and Regulation S offerings Rule 139 Offering participants may publish research about an issuer or its securities Applies to registered, Rule 144A and Regulation S offerings

14 3. The IPO Process (continued) 14 Negotiated points with the French regulator in the securities note Pricing and Price Ranges Lock-ups Adding access to the U.S. Market Limited number of SEC registered IPOs by foreign issuers Sarbanes-Oxley lack of flexibility in the deregistration/delisting process Depth of institutional market

15 4. The Market Abuse Directive 15 European Union Market Abuse Directive contains the general framework principles relating to insider dealing and market manipulation. In that respect, it includes a comprehensive regulation Comparison to U.S. Insider trading Rule 10b-5 Regulation FD, Form 8-K filings

16 4. The Market Abuse Directive (continued( continued) 16 European Union Market Abuse Directive has had strong practical consequences : management dealings in issuer's shares, disclosure of potential insiders Comparison to U.S. Form 4 filings Section 16 of the Securities Exchange Act of 1934

17 4. The Market Abuse Directive (continued( continued) 17 Other strong practical consequences: Limited purposes of buy-back programs Regulation of the stabilization of financial instruments Comparison to U.S. : Rule 13-e NASD Rules

18 5. The Transparency Directive 18 Transparency Directive aims at harmonizing the provisions of national law on periodic and ongoing information requirements for issuers of securities in order to lead to a high level of investor protection throughout the European Union. In France, there is already legislation relating to these matters and the work of harmonization is confined to light modifications. The Transparency Directive has imposed throughout Europe the regime already applicable in a number of countries including France and consisting in: an annual financial report ; half-yearly financial reports ; quarterly reports (only for the first and the third quarters). Contrary to U.S., this requirement does not require quarterly accounts but only a general description of the financial situation and the income of the issuer for the considered period and the turnover by segment of activity. A declaration of the persons responsible for these reports must be given. Comparison to U.S. Continuous Reporting under Securities Exchange Act of 1934 Form 20-F, 10-K Form 10-Q Form 8-K Form 6-K

19 New York, Monday, October 23,