The Luxembourg Stock Exchange (LSE) operates two separate markets: the Bourse de Luxembourg (Bourse), the regulated European market, and the Euro MTF (MTF), the multilateral trading platform.
With over 10,000 stock market introductions in 10 years, a growth rate of 35 percent since 2013 and a mass of securities representing more than 25 percent of the securities introduced to the LSE, the MTF no longer has to prove its economic health and stability.
These figures, however, provide an imperfect picture of the MTF and the opportunities it offers.
The MTF is an effective solution because it is based on a state-of-the-art trading infrastructure (UTP), and financial news service. The MTF is an international solution because it enjoys worldwide recognition. The MTF is a pragmatic solution because it offers reduced deadlines and listing costs. Finally, the MTF is a flexibl solution because it establishes a lighter reporting and disclosure framework.
Arguably, the MTF is the obvious solution to any company or investment fund wishing to introduce its securities on the stock market. However, the objective of this article is much wider and describes not only the advantages of the MTF, but also the listing process itself.
Indeed, the success of an IPO depends not only on the infrastructure of the target market, its functional specificities of the intermediaries involved in the listing process. The success of a listing also requires intensive upstream preparation. More precisely, it is a question of perfect and comprehensive understanding of stock market introduction.
In other words, once you have chosen the market you want to integrate, you have to determine how you get there. Which documents should you collect or draft? To which authority should the application file be submitted? What are the obligations imposed to entities listed on the MTF? What are the listing deadlines? These are only four of the many questions that arise when analysing the listing procedure.
The application phase
During the first step of the listing process, it will be necessary to address the application file. In order to meet the formal requirements imposed by the LSE, the file application must provide all information related to the issuer and its securities.
The LSE analyses the application file and notes that the file must contain a certain number of documents and that the prospectus, the key piece of the application file, must comply with a number of conditions.
Furthermore, in the context of a listing on the Bourse, the Financial Sector Supervisory Commission and the LSE will evaluate the application file.
As far as introduction on the MTF is concerned, only the LSE is entitled to evaluate and give its approval. As a result, the procedure is lighter, faster and cheaper.
The application file must contain the following documents: (i) a copy of the prospectus drawn up in accordance with the dispositions included in the rules and regulations of the LSE; (ii) a statement by the issuer confirming that no event occurred after the approval of the prospectus, affecting the value of the securities to which the listing relates; (iii) a declaration by which the issuer undertakes to comply with the laws and regulations of Luxembourg; (iv) the issuer’s articles of incorporation; (v) the issuer’s accounting records relating to the previous three years, prepared in accordance with GAAP; (vi) a copy of the agreements or any other documents governing the representation of security holders of the issuer; (vii) a declaration by which the issuer certifies that the legal position of the securities is consistent with relevant legislation and regulations, that the legal position and structure of the issuer comply with the applicable legislation and regulations related both to its incorporation and its operation, in accordance with its articles of association, that a credit institution or financial institution has been designated in such a way that the financial service of the securities is ensured in Luxembourg for the holders, and that the administration of securities transactions and the payment of dividends and coupons are insured; and (viii) finally, a letter of commitment and an application form.
The prospectus is the key piece of the application file. Drafted in English, French, German or Luxembourgish – in accordance with the Regulations, the prospectus must be published (in newspapers, on the Financial News Service, etc.) to enable potential investors to obtain relevant and accurate information.
The prospectus will first provide data about the issuer’s activities, its business, capital and assets, financial position and results.
Relevant information on the persons responsible for the prospectus and the audit of its accounts must also be included. Moreover, a presentation of the administrative, management and supervisory infrastructure must be provided.
A section of the prospectus will be dedicated to an in-depth description of the risks inherent to the issuer and the securities issued.
Finally, the prospectus must provide all information relating to the issuer’s recent developments and prospects.
Approval and listing
As soon as the file application is constituted, it can be submitted to LSE and the second phase will start.
LSE teams will make their first comments within three working days of the submission of the application. Additional comments are generally made within 24 hours to two business days following the filing of the updated prospectus.
As stipulated in the Regulation, the LSE has one month to make a decision on the listing application, once all the required documents have been received. The absence of a decision is tantamount to a refusal.
Immediately after approving the file application, the LSE will integrate the securities to the official list. From that moment, the securities may be traded on the MTF market, minus any additional formalities.
The ongoing obligations
Each issuer with securities listed on the MTF is subject to ongoing obligations.
We may distinguish between the obligation to disclose accounting information and the obligation to disclose structural information.
In terms of accounting reporting requirements, the issuer will have to publish an annual financial report and semi-annual reports. These reports may be drafted in GAAP, IFRS or equivalent format.
The annual report should be published as soon as possible. Semi-annual reports should be published within four months from the end of the covered period.
With regard to structural reporting requirements, firstly, and in a general way, the issuer must disclose any information that may have an impact on the value of the securities and which is considered essential to guarantee investor protection and information and to ensure market stability.
Thereafter, the issuer shall promptly disclose all transactions affecting the rights connected with the securities. It is also obliged to notify – within nine days – any acquisition of interests exceeding the established thresholds (the criterion retained: the percentage of voting rights acquired).
Finally, and in conclusion, the issuer shall also make public any amendment to its Articles of Incorporation. All events relating to the operation of the issuing entity that may affect the markets, investors or the value of the securities will also be disclosed.
Introducing shares or bonds to the market increases the visibility of the issuer and allows easy access to capital, and therefore can give a new lease of life to a company or an investment fund.
After deciding to list its securities, an entity needs to determine the stock market it wishes to integrate. In this respect, the Luxembourg MTF has the undeniable advantage of efficiency, flexibility and simplicity.
The success of a stock market introduction does not depend purely only on the specificities of the target market. In order to achieve the objectives the issuer has set itself, the issuer must consider the listing process as a whole.
Olivier Hance is the managing partner and Ruben Castro is an associate at Hance Law Avocats. Mr Hance can be contacted on +352 274 404 or by email: firstname.lastname@example.org. Mr Castro can be contacted on +352 274 404 or by email: email@example.com.
© Financier Worldwide
Olivier Hance and Ruben Castro
Hance Law Avocats