What do you need for a successful IPO?

When does the process of IPO start?

The process starts with personal and professional decisions of the owners of the company. In this phase, in addition to finding the best possible moment for entering the stock market, it is important to choose the right method. Among the possible solutions, the so-called IPO (Initial Public Offering) is the most challenging process, in which the possibility of share subscription is open to institutional and private investors. In the case of Wizz Air, the owners had already had a clear intention to appear on the stock market from the very beginning, and they wanted to choose a central stock exchange, which eventually became London (LSE), and the company and the stock were ranked among the ones in the most prestigious “premium segment”.

The process of entering the stock market can be divided into two major stages: non-public and public.

What are the company’s tasks in the non-public phase?

At this stage, the market – at least officially – is not yet aware of the company’s intention to enter the stock market. As a result, this phase provides an opportunity for the company to prepare, to make even more attempts and to measure its potential market value without compromising its business interests. The owners of Wizz Air have repeatedly made a run at this phase in order to achieve the appropriate market valuation. These “attempts” were also good opportunities for PS to understand the challenges and expectations which are faced by the company and its supporting BPO provider.

In the non-public phase, it is essential to select a sponsor bank that coordinates the work of the owners, the management and the consulting firms, thereby ensuring the successful implementation of the subscription process. At this stage, it is necessary to select the stock exchange advisors, consultants, to edit the IPO timetable, and to create the company stock exchange prospectus (the so-called “Prospectus”). The prospectus is a brochure containing all the essential details of the process, and it plays a significant role in the sale of the company’s shares not only as a legal document but also as a marketing tool. Then, the next step is the company’s business, financial and legal due diligence to ensure that the prospectus is credible and complete. It was unique in Wizz Air’s due diligence process that a significant part of the accounting functions was outsourced for an external company, PS. “It was a great appreciation for us that during the due diligence process, no significant mistakes were found in the built-in workflows and in our works. In addition to the prospectus, several other reports are made at this stage – even reports that will never be published, these reports only mean a guarantee for the sponsor, because they are also responsible for stock market appearance based on real data.” said Anett Diósi, Process Solutions senior manager responsible for Wizz Air.

The public phase starts with the public announcement of the intention of IPO.

When and in what form is it worth announcing the IPO?

Announcing the intention to enter the stock market is an extremely important step, as market players take this very seriously and a possible withdrawal may have an adverse effect on the company’s market perception. This is the time when the introduction marketing campaign starts, analyst evaluations are published about the company, and the prospectus also needs to be published at this stage. The management roadshow is also at this stage, during which the company’s top managers personally present the company’s business operations and financial results to the potential investors. After the roadshow, the company executives, together with the consultants, once again review all important documents and determine the issue price of the shares based on the degree of investor interest and – if there are new issues – the number of newly issued shares. Then the official announcement of the intention to enter the stock market will be announced in the relevant stock exchange and financial supervisory bodies, and the final approvals will be received from them. As a final step, the registration takes place, during which the company’s shares are listed and these shares are started to trade on the market within a ceremonial introduction procedure.

Wizz Air publicly announced its intention to enter the stock market in May 2014, but the market conditions were not appropriate, so they decided to backtrack. At the end of 2014, however, the process was re-launched, and in February 2015, the trading could start on the London Stock Exchange with Wizz Air’s shares, with a very favourable validation.

What processes can be automated and outsourced in the process of IPO?

In the issue of shares, a significant part of the process is suitable for outsourcing, as these are mostly one-off tasks for which companies generally do not have the expertise or resources. Decision-making is the most important element which cannot be outsourced. The owners of the company are those who make decisions based on being aware of all the important circumstances. It is also the responsibility of the owners and the management to ensure a successful stock exchange process, and the required material and human resource of the stock market presence, which also means a continuous investment in the future. “Professional accounting companies such as Process Solutions provide significant support to the company’s management in the key phases of entering the stock market, and they also support stock exchange presence by having the required high-level professional knowledge in accounting and reporting areas. Besides, as an outsourcing company, they can also provide additional human resources if needed.” said Zsolt Németh, accounting and tax manager at Wizz Air.