Introduction

For any company, the decision to go public is a key milestone in its development. By doing so, it enters the public arena and gets access to the capital market and a much broader investor base. However, a public company is subject to public scrutiny, and must also fulfil stricter regulatory requirements than a privately held company. To avoid unexpected difficulties or even failure of the project, an IPO candidate, its shareholders and its executive management should prepare the flotation carefully and familiarise themselves with the regulatory requirements.

One of the first steps during the preparatory phase is the selection of the listing venue, where Switzerland offers very attractive conditions through a combination of its strong financial centre and the stable and issuer-friendly Swiss legal and regulatory regime. This is the case not only for companies which were founded in Switzerland, but also for foreign issuers. In 2018, for instance, the two largest Swiss IPOs (CEVA Logistics AG and SIG Combibloc Group AG) saw the ultimate holding company of the Group migrate to Switzerland solely for the IPO, underlining the attractiveness of the Swiss market.

With a variety of listed companies across all industries, SIX Swiss Exchange is the main and leading stock exchange in Switzerland. It offers a liquid market with state-of-the-art trading conditions. Given its importance, and unless indicated otherwise, references in this contribution to listing requirements and reporting obligations refer to the rules set by SIX Swiss Exchange. The smaller BX Swiss exchange is more focused on Swiss issuers.

Switzerland has seen strong IPO activity over the past two years, with 2018 being the most active year in a decade. In 2018 and 2019, the following companies listed on SIX Swiss Exchange with an initial market capitalisation of more than CHF 1 billion:

  • CEVA Logistics AG (CHF 1.4 billion).
  • SIG Combibloc Group AG (CHF 3.9 billion).
  • Medacta Group SA (CHF 1.9 billion).
  • Alcon Inc. (CHF 28.3 billion).
  • Stadler Rail AG (CHF 4.3 billion).
  • SoftwareONE Holding AG (CHF 2.9 billion).

Until 31 December 2019, the regulatory framework for Swiss IPOs has been primarily determined by the self-regulation of the Swiss stock exchanges with limited statutory provisions regarding the offering of shares to the public. In particular, there was no regulatory authority which reviewed and needed to approve the issue prospectus.

On 1 January 2020, the new Swiss Financial Services Act ("FinSA") entered into force, resulting in a fundamental change of the regulatory environment in Switzerland. For the first time, the FinSA and the implementing ordinance (the Swiss Financial Services Ordinance ("FinSO")) provide for detailed requirements regarding the content of a prospectus and its review by the new Swiss Financial Market Supervisory Authority ("FINMA")-licensed review bodies. Although well-known on an international level, the new regime is a novelty in Switzerland where, until now, SIX Exchange Regulation merely checked whether a prospectus formally fulfilled the requirements set by SIX Swiss Exchange. Given, however, that also under the 'old' regime the market practice already adhered to international disclosure standards, it is not expected that this change will fundamentally change the content of Swiss IPO prospectuses or the timeline of the preparation for an IPO. Pursuant to the applicable transitional provisions, the new regulations will only become applicable on 1 October 2020 at the earliest, or six months after the licensing of the first review body. Until the first review body has been licensed by FINMA, all IPOs must be conducted following the 'old' regime.

The IPO process: Steps, timing and parties and market practice

While the IPO process depends significantly on the IPO candidate and the envisaged structure (primary vs. secondary offering and/or a so-called "complex financial history"), the process can broadly be divided into three phases (with a fourth phase following the listing):

  • Phase I: Preparation (approximately four to six months prior to the first day of trading) During this phase, the current shareholders and the issuer, together with their advisors, set up the structure, and take and implement the strategic decisions for the IPO-readiness of the company:
    • Selection of advisors: In a first step, the issuer chooses its advisers, which include in particular the underwriting banks, the legal advisors to the issuer and to the underwriters, the auditors, and often a pre-IPO advisor. Typically (and, in particular, if the offering is structured as a Rule 144A offering), each issuer and underwriter is advised by two law firms: a Swiss law firm for Swiss law and SIX rules-related matters, and an international counsel, whose task is primarily to ensure compliance with international and U.S. securities laws. Depending on the structure, a selling shareholder might also engage separate counsel. In most cases, the issuer appoints further advisors, such as a specialised PR firm to assist with the marketing.
    • Structuring: The underwriting banks advise the issuer and its current shareholders on the structuring of the offering and, in particular, whether the offering should be structured as a primary offering (sale of newly created shares) or secondary offering (sale of existing shares only), or a combination of the two. In case the issuer is not a Swiss company, the structuring includes a decision on whether a foreign entity should list its shares on SIX Swiss Exchange or whether the company should migrate to Switzerland for the IPO. This decision is typically driven by marketing and tax considerations. Structuring may also include the reorganisation of a group of companies, such as the establishment of a new holding company
    • Development of equity story: Together with the issuer, the underwriters develop the equity story to market the shares. A key element of this workstream is meetings between the issuer and potential investors on a confidential basis to test the water (so-called "pilot fishing" and "early-look meetings"). In case the issuer has publicly traded debt outstanding (in particular, high-yield bonds), these meetings must comply with the relevant requirements regarding the disclosure of pricerelevant information; in particular, under the European Market Abuse Regulation ("MAR"), if the bonds are traded at an EU venue. The development of the equity story ultimately leads to the issuer presenting itself to the underwriters' analysts, following which the analysts will prepare and publish research reports for the investors. These reports help to attract the attention of investors for the IPO, and are one of the key elements of the marketing strategy

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Originally published 10 June, 2020

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