Why go public?
To be listed on AktieTorget, a company must first undergo a due diligence process.
The purpose of the process is to determine whether the company meets the listing requirements and has provided reliable, accurate, timely and sufficient information in its listing memorandum. The information must be detailed and extensive enough that an investor can use the memorandum as a basis for an investment decision.
The due diligence is intensive and requires a great deal of work by, and resources from, the company. This is usually considered time well spent, however, giving the company the benefit of having been analyzed and reviewed, and providing proof that its affairs are in order and that the company is ready for a stock listing. The due diligence also lets investors know that AktieTorget has examined all the relevant information on the company.
The due diligence work results in a report which, together with the company’s listing memorandum or prospectus, provides a basis for the Listing Committee’s decision whether the company can be listed.
Components of the due diligence
In brief, the due diligence consists of the following steps:
Review of the company
We review the company with a special focus on its business model, organization/competencies, ownership structure, financial and commercial status, and valuation. The company must meet the stock market’s information requirements and otherwise conduct itself properly and professionally and exhibit sound judgment. With regard to the business model, it is primarily the job of the market to determine whether the model is sustainable and commercially viable. The business model – and the company’s valuation as assessed by AktieTorget – must be reasonable, however. The business has to have made it off the drawing board. Depending on whether it is in the development stage or has a finished product on the market, the company will face different status requirements. Regardless, however, it must be able to present two audited annual reports.
We personally review the following individuals:
- Board members, including any deputies.
- Management: The CEO, any Executives VPs, the CFO and any other senior executives who are critical to the business. The CEOs of any subsidiaries are also included in the review.
- Principal owners: Direct and indirect owners with a holding exceeding 10 percent of the votes or capital in the company.
When necessary, the review will also comprise other individuals.
The review comprises the following:
- Each individual’s current and previous business ties: Review of their professional experience and any involvement in bankruptcies, to identify irregularities or wrongdoings.
- Integrity: Information is obtained on the individual’s integrity, including through extracts from police records, to identify any signs of impropriety.
- Suitability and conflicts of interest: Assessment of the individual’s competency and suitability for the position, and analysis of any ties and conflicts of interest the individual may have in relation to the company and its owners and management.
- Credit check: A credit check is obtained to determine the individual’s principal occupation and financial situation as well as any dependence on the company.
- Restriction on business activities and personal bankruptcy: Verification whether the individual is or has been prohibited from engaging in business activities or has filed for personal bankruptcy, to identify any previous irregularities or professional misconduct.
- Search of the EU’s sanctions list: Verification that the individual is not on the EU’s sanctions list (list of those suspected of involvement in terrorism, association with terrorists, etc.).
- Media background check: Review of information on the individual on the internet and in other media to identify any signs that the individual may be unsuitable for their role in the company.
Review of prospectus or listing memorandum
We determine whether the company’s prospectus or listing memorandum meets AktieTorget’s requirements according to a memorandum checklist. The requirements essentially correspond to those for prospectuses, but are more substantial. (The Swedish Financial Supervisory Authority’s [SFSA] review is largely a formality). We attach special importance to the descriptions of the company’s business model, commercial and financial status, and valuation. Other important areas include equal treatment of stockholders, including the allocation principles used in share issues, and, where applicable, related party transactions.
The listing process normally involves the following steps:
IntroductionDuring preliminary contacts, the company provides basic information on its operating activities, business model, commercial and financial status, and valuation. The purpose is to identify at an early stage any non-compliance or important issues that must be addressed before the company can be listed. If it is determined that the company does not meet the listing requirements, it is informed of this. At this meeting we usually discuss timelines and specific listing requirements, e.g., that major owners must sign lock-up agreements.
Internal meetingAktieTorget then meets internally to discuss the company’s business model, organization, commercial and financial status, and valuation to initially determine whether the company is, or could be, ready for a listing. If the company plans to issue new shares in connection with the listing, we also determine whether the listing price is reasonable, i.e., whether the issue is based on a reasonable valuation of the company. After the meeting, the company receives feedback with our opinions. If AktieTorget determines that conditions are in place to begin a review process, a listing application form is sent to the company. The application fee is SEK 100,000, SEK 50,000 of which is debited when the application is received. If, after completing the review, AktieTorget approves the company’s application, the second SEK 50,000 is debited.
Preparation of due diligence report and listing memorandum/prospectusAktieTorget completes its review of the company (see above under the heading Components of the review) and prepares a report. The company prepares a listing memorandum or prospectus that AktieTorget examines.
Meeting with the Listing CommitteeAktieTorget’s Listing Committee examines the review report and listing memorandum/prospectus and decides whether the company can be listed. The Listing Committee is comprised of various employees of AktieTorget, including AktieTorget’s head of listings and head of operations. External specialists are brought in as needed.
Start of tradingIf the Listing Committee has given its approval, trading can begin within days. Often, however, the company will issue shares in connection with a listing to diversify its ownership. In such cases the issue must be completed before trading can begin. There are also instances where the company is given “homework” and must address certain issues before trading can begin.