ipo nyse overview

8/6/2019 Ipo Nyse Overview

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New York Stock Exchange – IPO Overview 1 Regulatory Background

1.1 Overview of Regulatory Background

Securities must be registered under Section 12(b) of the Securities Exchange Act of 1934 (the

"Exchange Act") before they can be traded on the New York Stock Exchange (“NYSE”) of theUnited States of America. Section 12(b) registration for foreign issuers should be made on Form20-F. This form requires general information regarding the business, properties, capitalisation, andmanagement of the company. Form 20-F requires less detailed information than would be requiredof an American company. However, requirements for financial statements, schedules, andaccountants' certificates are substantially the same as those required of domestic companies.

Registration is required even if the company has previously registered its securities in connectionwith a public offering in the United States or if it has registered securities under Section 12(g) of theExchange Act for purposes of over-the counter trading. However, short-form registration isavailable for companies that have registered under Section 12(g) or that have securities registeredunder the Securities Act of 1933 (the "Securities Act").

Where a listing applicant has not previously registered its shares with the U.S. Securities andExchange Commission (the "SEC") under either the Securities Act or the Exchange Act, draftregistration statements and Form 20-F should be submitted to the SEC for preliminary review andcomment in advance of filing the company's listing application.

1.2 Regulatory Entities

The regulatory entity involved in listing on NYSE is the U.S. Securities and Exchange Commission .

1.3 Required Approvals

SEC approval is required for listing and initial public offerings.

2 Listing Criteria

2.1 Suitability / Eligibility of Listing Applicant

Foreign companies may elect to apply for listing under either the domestic listing standards orunder the worldwide listing standards for foreign issuers. The worldwide listing standards focus on

worldwide, rather than US, distribution of the foreign issuer's shares, eliminating the impedimentpresented by the domestic standards' requirement that companies have a minimum distribution of shares within the US.1

CRITERIA REQUIREMENTS WORLDWIDE DOMESTICMay satisfy either A, B, or C:

Distribution Round-Lot HoldersTotal Shareholders

5,000 A. 400 U.S. round lotshareholders

B. 2,200 total shareholders and

100,000 shares monthly

1 U.S. SECURITIES LAW FOR INTERNATIONAL FINANCIAL TRANSACTIONS AND CAPITAL MARKETS § 3.10 (2d ed.)



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trading volume (most recent 6months)

C. 500 total shareholders and

1,000,000 shares monthlytrading volume (most recent12 months)

Public Shares 2.5MM 1.1MM

Public Market Value US$100MM

IPO's, Carve-outs & Spin-offs

N/A US$40MM

All other listings N/A US$100MM

Financials Earnings

Aggregate Pre-tax Income forlast 3 years

US$100MM US$10MM

Minimum Pre-Tax Income ineach of 2 preceding years

US$25MM US$2MM(all 3 years must be positive)

OR

Aggregate Pre-tax Income forlast 3 years

N/A US$12MM

Minimum in the most recent

year

N/A US$5MM

Minimum in the next mostrecent year

N/A US$2MM

Valuation / Revenue TestMay satisfy either A or B

A. Valuation with Cash FlowTest

Global Market Capitalisation US$500MM US$500MM

Revenues (most recent 12-

month period)

US$100MM US$100MM

Aggregate Cash Flow for last3 years

US$100MM US$25MM(all 3 years must be positive)

Minimum Cash Flow in eachof 2 preceding years

US$25MM N/A

B. Pure Valuation Test


Revenues (most recent fiscalyear)

US$75MM US$75MM

Affiliated CompanyFor new entities with a parent



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or affiliated company listedon the NYSE


At least 12 months of operating history

Affiliated listed company isin good standing

Affiliated listed companyretains control of the entity

Yes

Yes

Yes

Yes

Yes

Yes

2.2 Trading Record Requirements

The company need not have previously been traded.2

2.3 Eligibility for Electronic Settlement

All securities initially listing on or after 1 January 2007 must be eligible for a direct registrationsystem operated by a securities depository. A "securities depository" means a securities depositoryregistered as a clearing agency under Section 17A(b)(2) of the Exchange Act.

Before listing on the NYSE, the issuer must confirm that a Committee on Uniform SecuritiesIdentification Procedures number identifying the securities has been included in the file of eligibleissues maintained by a securities depository registered as a clearing agency under Section 17 of theExchange Act.

3 Overseas Companies

Foreign incorporated companies may list on the NYSE. Companies already listed on a foreignmarket are also eligible to list on the NYSE.

It takes one to several months to complete the entire listing process—from the time the companybegins the confidential eligibility process with the SEC to the time the company's securities begintrading on the NYSE. The SEC registration process takes longer to complete and its duration cannot

be predicted by the NYSE.

The NYSE application process occurs on a parallel track to the SEC registration process. TheNYSE will typically complete the confidential review of eligibility within two weeks after theissuer submits all documentation. If faster review is necessary, the NYSE will meet an issuer'stimetable.

On receipt of formal clearance of eligibility, an issuer has six months to submit a formal listingapplication.

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2 Phone conversation, Yuri Tsagyak, NYSE Eligibility Review Department, (212) 656 57023 U.S. SECURITIES LAW FOR INTERNATIONAL FINANCIAL TRANSACTIONS AND CAPITAL MARKETS § 3.12 (2d ed.)



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For companies that list at the time of their initial public offerings ("IPOs"), if necessary, the NYSEwill rely on a written commitment from the underwriter to represent the anticipated value of thecompany's offering in order to determine a company's compliance with the listing standards.Similarly, for spin-offs, the NYSE will rely on a representation from the parent company'sinvestment banker (or other financial advisor) or transfer agent in order to estimate the market valuebased upon the disclosed distribution ratio.4 4 Shareholding Requirements

4.1 Public Float

The domestic listing standards require at least 1.1 million publicly held shares in the U.S. Theworldwide listing standards require 2.5 million shares with an aggregate market value of US$100million to be publicly held worldwide.

Shares held by directors, officers, or their immediate families and other concentrated holdings of 10% or more are excluded in calculating the number of publicly-held shares.5

4.2 Restrictions on Major Shareholders

Anyone who acquires 5% or more of any equity security must file a disclosure with the SEC andany exchanges on which the security is listed under SEC rule 13d.

4.3 Post IPO Lock-up

Lock-up agreements are commonly used to prevent company insiders (e.g., officers, directors,employees, friends, family, and venture capitalists) from selling their shares for a set period of timeafter listing. The federal securities laws do not govern the actual terms of lock-up agreements, but

they require a company employing a lock-up to disclose the terms in its registration documents,including its prospectus. At the same time, some states require lock-up agreements under their"blue-sky" laws, but these state laws may vary.

The terms of lock-up agreements may vary, but most prevent insiders from selling their shares for aperiod of 180 days. Lock-ups may also limit the number of shares that can be sold over adesignated period of time.

Although the securities laws do not govern lock-up agreements, Rule 144 of the Securities Actrequires owners of restricted securities to hold them for a certain period of time prior to sellingthem in the marketplace. Restricted securities are securities acquired in unregistered, private sales

from the issuer or from an affiliate of the issuer. If the company that issued the securities is subjectto the reporting requirements of the Securities Exchange Act of 1934, then the owner must hold thesecurities for at least six months.

5 Listing Procedure and Timetable

First Step: Company submits all information for confidential review of eligibility.

By the third week: A NYSE representative will contact the company as to eligibility clearance andconditions of listing. The company will be provided with copies of original listing applications anda guide to supporting documents.

4 NYSE Manual, 103.01A5 NYSE Manual, 103.01



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The company may file an original listing application and supporting documents any time within sixmonths. For purposes of this timetable, assume that the original listing application is filed within 4-5 weeks after notification of eligibility clearance.

Once a company has filed an original listing application and sufficient supporting documentationwith the NYSE, the NYSE will authorise the company's securities for listing and certify such

authorisation to the SEC. Additionally, the NYSE will acknowledge receipt of the company'sapplication via publication in the regular Weekly Bulletin or through some other comparable outlet.The SEC, under the Exchange Act, requires a mandatory 30-day waiting period, however, this canbe accelerated upon request.

By the twelfth week: The company's securities are admitted to trading. The original listing date canbe set for any day after effectiveness of registration under the Exchange Act. 6

5.1 Marketing the Offer

The following applies to all U.S. exchanges:

Prior to filing a registration statement with the SEC, issuers may not sell a security, nor may anissuer make any offer (either oral or written) to sell a security. Section 5(a) of the Securities Actsubjects all issuers to a waiting period after the registration statement is filed but before theregistration becomes effective. Sales and contracts of sale are prohibited during this period,however oral offers to buy and sell the security are permitted. Written, radio, and television offersto sell during the waiting period are generally prohibited, but an issuer may transmit a preliminaryprospectus under Securities Act Rule 430, a summary prospectus under Rule 431, or a completeSecurities Act Section 10(a) prospectus if available.

5.2 Required Documentation

Before submitting an application for listing, all issuers undergo a confidential review of eligibility.A foreign issuer should submit the following information, much of which is in the issuer'sregistration statement on Form 20-F, for the review:

• a certified copy of its charter and bylaws in English;

• samples of certificates traded or to be traded in the U.S. market;

• a copy of the depositary agreement, if any;

• annual reports to shareholders for the last five years, and, if no English version is available,translations for the last three years' reports;

• the latest available prospectus for an offering under the Securities Act and latest annual SECfiling; if no SEC documents are available, submit the most recent document used for a publicoffering or an offering to existing shareholders and any filings made with a regulatory authority;

• the proxy statement distributed to shareholders for the most recent general meeting, translatedinto English;

• worldwide and U.S. stock distribution schedules;

6 NYSE Manual, 702.02



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• data characterising the share distribution and the number of publicly-held shares, provided forboth U.S. and worldwide holdings such as amount of stock owned by large holders, stock owned by officers, restrictions on stocks, and a list of the markets on which the stock is alreadytraded;

• description of full ownership of any partially-owned subsidiaries;

• a list of the issuer's principal bankers;

• agencies that regulate the issuer or any part of its operations and a description of the extent of that regulation;

• the name, title, and principal occupation of the issuer's directors and principal officers;

• the number of employees and general status of labour relations;

• a description of pending material litigation and opinion of counsel as to the potential effect of the litigation on the issuer's operations; and

• a letter from counsel representing that, to the issuer's knowledge, no officer, board member, ornon-institutional shareholder with more than 10 per cent ownership of the issuer has beenconvicted of a felony or misdemeanor for financial causes in the past 10 years.7

Once the NYSE has issued a formal clearance of eligibility, an issuer has six months to submit aformal listing application. The listing application provides a summary of the issuer's business andsecurities and describes the conditions under which future shares will be issued. The issuer mustalso file various documents in support of the application:

• Signed Application.

• Charter and By-Laws: Copy of the charter, certified by the secretary of the state / country of incorporation, and copy of the by-laws, certified by the secretary of the company.

• Resolutions of shareholders and the Board or Directors authorising issuance of any unissuedsecurities for which listing application is made; of the Board of Directors authorising listing of the specified amount of the designated security; of the Board of Directors authorisingappointments of the transfer agent and registrar.

• Opinion of Counsel: Opinion of counsel of standing satisfactory to the NYSE.

• Stock Distribution Schedule.

• Certificate of Transfer Agent.

• Certificate of Registrar.

• A letter from the registrar certifying the number of shares of the class or series for which listingapplication is made which were registered as of, or about, the date of the listing application.

7 U.S. SECURITIES LAW FOR INTERNATIONAL FINANCIAL TRANSACTIONS AND CAPITAL MARKETS § 3.12 (2d ed.)



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• Notice of Availability of Stock Certificates.

• Specimens of the securities for which listing application is made.

• Public Authority Certificate.

• Prospectus.

• Financial Statements: A set of the financial statements including the report of the company'sindependent public accountants or, in the case of interim statements, the report of the company'schief financial officer.

• Adjustments to historical financial data.

• Listing Agreement.

• Memorandum with Respect to Unpaid Dividends, Unsettled Rights and Record Dates.

• Registration form under the Exchange Act.8

Supporting documents should be completed at least one week before the date on which the NYSE isto take action on the application. If, for any reason, any of the required documents are not filed bythe time action is taken on the application, the NYSE may make its authorisation of listingconditional upon the file being completed prior to the first day of trading.

5.3 Publication of the Prospectus

The following applies to all U.S. exchanges:

• A preliminary prospectus must plainly state that it is subject to completion. If someone makes awritten request for a preliminary prospectus during the waiting period, the issuer must make areasonable effort to send the latest version on file with the SEC.

• Transmittal of a summary prospectus is subject to a variety of other requirements more fullyenumerated in Guy P. Lander, U.S. Securities Law for International Financial Transactions andCapital Markets Database § 2:23 (updated November 2007).

• After registration becomes effective, an issuer is no longer subject to the restrictions of Section

5(a), and must now comply with the prospectus requirements of Section 5(b) of the SecuritiesAct. All post-effective period prospectuses are subject to the requirements of Section 10. Atthis stage, an issuer must produce a prospectus prior to delivering any security.

6 Documentary Requirements

6.1 Contents of Main Listing Document

All securities listed on any U.S. exchange must comply with the Securities Act Rules. With respectto prospectuses, Rules 430, 430A, 430B, and 431 apply.

• Rule 430 applies to prospectuses for use prior to the effective date.

8 NYSE Manual, 702.04



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• Rule 430A applies to prospectuses in a registration statement at the time of effectiveness.

• Rule 430B applies to prospectuses in a registration statement after the effective date.

• Rule 431 applies to summary prospectuses.

7 Financial Information

7.1 Audited Financial Statements

For registration under the Exchange Act, foreign issuers register using Form 20-F, which must beprepared and signed by the foreign company. The form must be accompanied by financialstatements including audited consolidated balance sheets as of the end of each of the two mostrecent fiscal years together with audited consolidated statements of income and changes in financialposition for each of the three fiscal years preceding the date of the most recent consolidated balancesheet. These forms must be submitted with the listing application. 7.2 Applicable Accounting Standards

The NYSE accepts any accounting standards accepted by the SEC. For foreign issuers this includesgenerally accepted accounting principles ("GAAP") and International Financial ReportingStandards ("IFRS").9

7.3 Period Covered by Accounts

The number of years accounts must cover varies depending on the numerical listing standard underwhich the issuer applied.10

A company that qualifies as a smaller reporting company under federal securities laws may besubject to less burdensome requirements and shorter time periods.

7.4 Overseas Companies

Federal securities laws may impose additional requirements on foreign companies.

7.5 Pro Forma Financial Information

For certain companies in certain industries, a projection covering a two or three year period may be

entirely reasonable. Other companies may not have a reasonable basis for projections beyond thecurrent year. Accordingly, management should select the period most appropriate in thecircumstances.

7.6 Interim Financial Information

Companies must include financial information from the prior two or three years and the mostrecently completed quarterly financial information.

8 Parties Involved

9 Phone conversation, Yuri Tsagyak, NYSE Eligibility Review department, (212) 656 570210 Phone conversation, Yuri Tsagyak, NYSE Eligibility Review department, (212) 656 5702



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8.1 Sponsor

No advisor or sponsor is required where a company is simply applying to be listed. An underwriteris required if the company is seeking to make an IPO.11

Sponsorship by a NYSE member firm as to the liquidity and depth of the market for a foreigncompany's shares may substitute for documentation concerning the number of shareholders where

bearer shares are in widespread use.12

There are no specific requirements for a sponsor under NYSE guidelines.

Note, however, that as part of a confidential eligibility review, a company may be asked to providea list of the company's principal bankers and a statement of the holdings of the applicant's stock byany one of these bankers which is in excess of 5%.

8.2 Other Advisers

Attorneys: Although a formal opinion of counsel is no longer required, issuers must either:

• furnish the Exchange with copies of opinions of counsel filed in connection with recent publicofferings; or

• if no opinions of counsel exist, provide to the NYSE a certificate of good standing from thecompany's jurisdiction of incorporation.13

Accountants: The Sarbanes-Oxley Act of 2002 requires accountants who audit an issuer’s financialstatements to register with the Public Company Accounting Oversight Board.

9 Listing Costs

9.1 Listing Fees

An issuer must pay fees when they initially list shares, when they list additional shares of a listedsecurity, and annually. A foreign issuer applying to list on the NYSE must pay a one-time fee of US$50,000 plus an amount based on the number of ordinary shares issued and outstanding in theUnited States. If additional ordinary shares are issued in the United States during the year, theymust be listed and an initial listing fee paid for those securities.14 Finally, the issuer pays an annualfee based on a four-quarter average of securities issued and outstanding in the United States duringthe preceding year.15

When determining listing fees, calculations are made at each level of the schedule up to andincluding the last level applicable to the number of shares being listed. The total listing fee equalsthe sum of the amounts calculated at each level of the schedule.

Number of Securities Issued Fee Per Share

Up to and including 75 million US$0.0048

11 Phone conversation, Yuri Tsagyak, NYSE Eligibility Review department, (212) 656 570212 NYSE Manual, 103.313 NYSE Manual, 702.0414 U.S. SECURITIES LAW FOR INTERNATIONAL FINANCIAL TRANSACTIONS AND CAPITAL MARKETS § 3.13 (2d ed.)15 NYSE Manual, 902.02



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Over 75 million up to and including 300 million US$0.00375

Over 300 million US$0.0019

9.2 Underwriters’ Fees

Fees for underwriters will vary depending on the type and complexity of the transaction.Underwriters receive a commission plus a fee for services.

9.3 Lawyers’ and Accountants’ Fees

Costs will vary depending on the size and complexity of the offering. Accounting fees for severalrecent offerings by foreign companies typically range from US$100,000 to US$500,000 but can beas high as US$2 million depending on the issuer.

Legal fees may range between US$100,000 to US$375,000 depending on the type and complexityof the offering and the issuer.

10 Corporate Governance Requirements

Listed companies that are foreign issuers (as such term is defined in Rule 3b-4 under the ExchangeAct) are permitted to follow home country practice in lieu of the NYSE provisions for corporategovernance, except for the following:16

• Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3under the Exchange Act.17

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Listed foreign issuers must disclose any significant ways in which their corporate governancepractices differ from those followed by domestic companies under NYSE listing standards.They may provide this disclosure in English on their websites or in the annual reportsdistributed to shareholders.18

• Each listed company CEO must promptly notify the NYSE in writing after any executive officerof the listed company becomes aware of any material non-compliance with any applicableprovisions of the NYSE corporate governance requirements.19

• Each listed company must submit an executed Written Affirmation annually to the NYSE. Inaddition, each listed company must submit an interim Written Affirmation each time a change

occurs to the board or any of the committees subject to corporate governance requirements. Theannual and interim Written Affirmations must be in the form specified by the NYSE.20

11 Continuing Obligations

The NYSE has both quantitative and qualitative continued listing criteria. When a companyfalls below any criterion, the NYSE will review the appropriateness of continued listing.

Numerical Criteria for Capital and Common Stock

16 NYSE Manual, 303A.0017 NYSE Manual, 303A.0618 NYSE Manual, 303A.1119 NYSE Manual, 303A.12(b)20 NYSE Manual, 303A.12 (c)



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abandonment, destruction, condemnation, seizure or expropriation. This may also occur wherethe company has ceased to be an operating company or discontinued a substantial portion of itsoperations or business for any reason.

• Bankruptcy and / or liquidation: an intent to file under any of the sections of the bankruptcy lawhas been announced or a filing has been made or liquidation has been authorised and thecompany is committed to proceed.

• Authoritative advice received that security is without value.

• Registration no longer effective: The registration or exemption from registration pursuant to theExchange Act is no longer effective for any reason.

• Proxies are not solicited for all meetings of stockholders: Actively operating companiescurrently filing application to list on the NYSE must agree to solicit proxies from stockholders.

• Agreements are violated: The company, its transfer agent or registrar, violates any of its, or their,

listing or other agreements with the NYSE.

• Payment, redemption or retirement of entire class, issue or series: Whenever the entireoutstanding amount of a listed class, issue, or series is to be retired through payment at maturity,or through redemption, reclassification or otherwise.

• Operations contrary to public interest: if the company or its management shall engage inoperations that, in the opinion of the NYSE, are contrary to the public interest.

• Audit committee: An audit committee in conformity with NYSE requirements is not maintained.

• The failure of a company to make timely, adequate, and accurate disclosures of information toits shareholders and the investing public.

• Failure to observe good accounting practices in reporting of earnings and financial position.

• Other conduct not in keeping with sound public policy.

• Unsatisfactory financial conditions and / or operating results.

• Most recent independent public accountant's opinion on the financial statements contains a

qualified, adverse, or disclaimer opinion; or an unqualified opinion with a “going concern”emphasis.

• Inability to meet current debt obligations or to adequately finance operations.

• Abnormally low selling price or volume of trading.

• Unwarranted use of company funds for the repurchase of its equity securities.

• Any other event or condition which may exist or occur that makes further dealings or listing of the securities on the NYSE inadvisable or unwarranted in the opinion of the NYSE.

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