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Safe IPO

Securing equity access without risk

As has been observed in recent years, the risk of failure in a classically conceived IPO is considerable and the chances of success are unfortunately often dependent on exogenous factors. Is this necessarily so, or are there ways to significantly reduce these risks of an IPO?

BankM offers a safe alternative to the classic IPO, the Safe IPO. By gradually securing access to the capital market, it is possible to raise capital via the stock exchange in the short to medium term without, in principle, jeopardizing the equity financing option through the logical coupling of the two measures.

The fact is that the capital market has provided companies listed in Germany with several billion euros in capital increases in each of the last few years, even though classically conceived IPOs have unfortunately failed all too often at present. In contrast, the VC market and the private equity market are still in their infancy. Despite all the volatility, the stock market still ensures listed companies reliable access to equity capital, which can contribute significantly to successfully overcoming the current crises. However, if a company fails at the IPO stage, access to the equity financing that secures the company’s success is usually not possible either.

Separation of share placement and listing

The solution to this dilemma lies in a resilient and high-quality access to the stock exchange, which is achieved by means of transparent provision of detailed information about the stock market candidate in the context of a public offering of shares. In contrast to a simple listing, this enables the share to be marketed to potential investors and thus provides timely access to equity capital.

The “Safe IPO” represents an efficient mixture between a classic IPO and a listing. The main difference to the classic IPO is the fundamental logical separation of the share placement and the production of the stock exchange listing.

The IPO is carried out at a time guaranteed by the accompanying bank, while the corporate action is carried out independently of this. A capital increase is carried out if there is a specific purpose for the company and both internal and external factors permit a successful placement. This can, but does not have to, take place at the same time as the IPO and, if separated in time, is possible within a short period of time depending on the size of the capital increase. In this way, the issuer escapes the currently unfavorable price discovery process, which leads to a high risk potential in the context of a classic IPO, as the failure of the IPO constantly hovers as a sword of Damocles over the entire transaction. With a safe IPO, on the other hand, a market price is already formed in the run-up to the capital increase, which then significantly simplifies the price discussion for all parties involved in a capital transaction.

Prerequisites easy to represent

As a prerequisite for the implementation of the “Safe IPO”, it should be ensured – in addition to the other requirements such as legal form, minimum capital and company age – that the company has a minimum number of shareholders or can represent a minimum free float of approx. 20% in the near future and that the company financing is basically secured. By preparing a securities prospectus for the public offering of at least the existing shares, the Safe IPO enables public advertising of the IPO, which allows comprehensive communication already in the run-up to the IPO and permits the simultaneous addressing of different investor groups, in the best case with a securities prospectus, research study, company presentation and other information materials.

Actively manage share demand

The securities prospectus is also the main difference to a simple listing. In most listings, the large number of sellers (existing shareholders) is usually matched by only a small number of potential new buyers due to the lack of marketing opportunities. In practice, this leads to falling share prices in most listings. In contrast, in a safe IPO, the majority of shares held by existing shareholders are tied up by selling restrictions. Thus, a relatively small free float meets potentially substantial demand generated by the marketing. For this reason, it is essential to ensure moderate marketing at the beginning of the Safe IPO in order to avoid sudden price increases.

Planning growth for the long term

In the event of very short-term financing pressure on the part of the company and presumed selling pressure on the part of existing shareholders, this stock market access is generally not suitable. However, companies planning for the long term, whose basic business is solidly financed, but which are looking for reliable access to equity capital for promising, multi-year growth projects, should consider the possibility of a Safe IPO.

We would be happy to explain the further advantages of the Safe IPO for medium-sized companies in a free initial consultation.


BankM AG
Baseler Strasse 10
60329 Frankfurt

Phone: +49 69 7191838-0
Fax: +49 69 7191838-50

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