IPO vehicle and offer structure

A proprietary company cannot issue or offer to sell shares to the public or retail shareholders. In this respect, it will be necessary for a proprietary company to convert to a public company before an IPO.  Alternatively, a new public company could be established to be the IPO vehicle and to own the shares in the proprietary company.

It will be important to determine early in the process which entity will be listed. This will depend on a number of factors including:

• whether the offer is a primary issue or sell-down (including tax ramifications);

• the number of shareholders and ease of execution; and

• a desire to contain prospectus liability.

IPO structures

• Secondary sales

  • Sale of shares by existing shareholders directly to the public.  Often combined with a new share issue (which is known as a “primary issue”).

• Primary issue

  • New shares issued to the public with a possible buy-back/capital return on shares held by existing shareholders or dilution of existing shareholders.

• Vendor sale through SaleCo

  • Sale of shares by existing shareholders to SaleCo.  Sale of existing shares by SaleCo to the public. Often combined with a new share issue.

• FloatCo

  • New special purpose vehicle, FloatCo (or its subsidiary), enters into an agreement with existing shareholders to acquire the business using proceeds of a new share issue to the public by FloatCo. Consideration for acquisition of business paid to existing shareholders can be cash and/or shares.

For more information on the IPO process, check out our discussion paper here.

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For more information, please contact Gavin McInnes on 07 3367 8681 or g.mcinnes@grmlaw.com.au.

 The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of GRM LAW 's legal practitioners who will consider their particular circumstances.

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