FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
6.2 IPO Exits IPOs are not a common exit strategy for French start-ups (compared to a strategic sale or private equity buy-out). Startups considering an IPO must weigh up various factors that influence the timeline, including market conditions, the matu - rity of the business, regulatory compliance and the amount of capital needed. The primary listing venue in France is the Euronext Paris. The regulated market of Euronext Paris is designed for highly structured companies that have the resources to meet the requirements of European regulations, so that they can attract international investors and a more liquid market. Euronext Growth is suited to SMEs, with simpli - fied listing and reporting requirements. Offering structures for growth companies often involves a combination of public offerings for retail investors and private placements for insti - tutional investors. Generally, a pricing range is disclosed at the opening of the offering and will be set at the end of the subscription period depending on the bookbuilding outcome. 6.3 Pre-IPO Liquidity As the employee equity incentive is subject to sale restrictions, secondary market trading is needed prior to an IPO to provide liquidity for early investors and employees. Liquidity can be provided by new investors (subject to the shareholders’ provisions on transfer of shares) or existing stockholders to demonstrate the sup - port of core shareholders before an IPO. One of the main challenges is control over non-public information communicated to employees as part of the secondary. Another challenge is the valu - ation of the company and the secondary price, which may impact the IPO price.
The most likely situation is for one or more exist - ing shareholder(s) to purchase shares from other existing shareholders. An acquisition offer allows existing shareholders in a private company to sell some – or all – of their shares, enabling them to cash out without having to wait for an IPO that, in theory, might be several years away. This type of acquisition offer could also simplify the company’s shareholder structure ahead of a potential IPO. Once the company is listed, a tender offer can be launched to all shareholders of the company. French legal provisions that govern the offering of a company’s equity securities in a venture capital transaction are primarily found in Euro - pean regulations, the AMF’s regulations, the Monetary and Financial Code ( “Code Monétaire et Financier” ) and the Commercial Code ( “Code de Commerce” ). These provisions are designed to protect investors and ensure market transpar - ency. Regulatory Framework 7. Regulation 7.1 Securities Offerings • Prospectus requirement – for public offerings, a prospectus approved by the Autorité des marchés financiers (AMF) is required unless an exemption applies. • Private Placements – private placements to a limited number of investors or qualified inves - tors (less than 150) are common in venture capital and are exempt from the prospectus requirement. • Employee Equity Participation – specific rules apply for employee share ownership plans, which may include preferential terms under certain conditions.
203 CHAMBERS.COM
Powered by FlippingBook