The Concept of a Public Offer
The foundation of an IPO is the public offer of securities. Under the Law on Securities Market, a public offer is a proposal to at least 100 persons, or to an unspecified number of persons, for the direct or indirect sale of securities in the name of the issuer. A proposal of the same kind connected with the securities of an unlisted enterprise, raised in the name of a person who is not the issuer, is also treated as a public offer. The issuer must conclude with a brokerage company or a licensed financial institution an agreement on the offer of securities for their placement. It is important that an offer and sale only to experienced investors is not treated as a public offer, while during a public offer the holder of securities of another issuer may also propose to the issuer that his or her own securities be included in the offer. This threshold definition determines from the outset whether the transaction falls within the strict public-offer regime or remains a private placement.
The Prospectus and the Application
A public offer is carried out only upon the publication of a prospectus prepared and approved in compliance with the law and the rules of the National Bank. The National Bank examines the application within 15 days of submission: where deficiencies exist it requests additional information, where conformity exists it approves the prospectus, and where the requirements are not met it refuses approval in writing; if no information is provided within 15 days, the prospectus is deemed approved. The preliminary prospectus contains information about the issuer — its name, address, date of foundation, the quantity and class of placed securities, the names of the members of the governing organ and information on possible conflicts of interests; a description of the activity of the last 2 years together with the main risks; the auditor-confirmed financial statements for the last 2 economic years; the class and approximate quantity of the securities to be issued, the details of the subscription procedure and the intended use of the proceeds. The current financial information indicated in the final prospectus must not be older than 18 months. No later than 10 days after the approval of the preliminary prospectus the issuer submits to the National Bank the document on the terms of the offer.