Step 1

The coordinating institution sends its analysts and underwriters to check the financial health and future prospects of the company. The future ability to continue honoring its commitments and determination of the most appropriate model for going public are analyzed.

The studies include contact with the financial department, analysis of the financial statements, review of the production facilities of the company, interviews with the related areas, verification of the company’s situation with regard to the competition, simulation of results and fund contributions.

According to the results obtained in the study, the type and form of stock to be launched in the market are chosen, as well as the dividend policy to be adopted.

Step 2

Once the operation conditions are defined, the company and its financial agent discuss the characteristics of the distribution, primarily if there will be a firm underwriting guarantee or if the operation will be conducted under a best efforts regime.

In the best efforts regime, the coordinator and other participants do not assume responsibility for underwriting the securities not placed in the market. This practice, if made as in the case of a contract with a firm guarantee, has costs in the coordination and distribution contract to cover the total or partial guarantee commission.

Briefly, some of the items addressed in this contract include: issuance authorization and its characteristics; the placement regime – in the case of a guarantee or best efforts; operation timetable; CVM registration; obligations of the parties and compensation; third party participation, if there is any; term; termination; penalties; and jurisdiction.

Once the operation conditions are defined, the company and its financial agent discuss the characteristics of the distribution, primarily if there will be a firm underwriting guarantee or if the operation will be conducted under a best efforts regime.

In the best efforts regime, the coordinator and other participants do not assume responsibility for underwriting the securities not placed in the market. This practice, if made as in the case of a contract with a firm guarantee, has costs in the coordination and distribution contract to cover the total or partial guarantee commission.

Briefly, some of the items addressed in this contract include: issuance authorization and its characteristics; the placement regime – in the case of a guarantee or best efforts; operation timetable; CVM registration; obligations of the parties and compensation; third party participation, if there is any; term; termination; penalties; and jurisdiction.

Step 4

A prospectus is required by law and mandatory for all public offers of securities (with some exceptions and waivers).

According to the regulations, the prospectus is the document that contains “complete, precise, accurate, up-to-date, clear, objective and necessary” information” for investors to “carefully make their investment decision.”

Step 5

To become a publicly-traded company, the company must be established in the legal form of a corporation under the terms of Law No. 6,404/76.

The CVM is responsible for registering publicly-traded companies for trading on the exchange of over-the-counter market, in compliance with Law 6,385/76. CVM Instructions No. 13/80 and 202/93 also relate to this issue.

The requirements for registering “Publicly-traded companies” with the CVM can be found at Instruction CVM nº 480, with the documents that must be submitted.

And the next slide shows more about the time periods for going public.

The time estimated for registering a publicly-traded company is:

Source: BM&FBovespa

Step 6

Shares distributed publicly are traded on the stock exchanges or in the over-the-counter market. To trade on the stock exchange, the company must be registered with the exchange.

Once the admission request is granted, the company can start trading, which will result in payment of an annual fee.

Trading on the exchange represents the high point of the going public process since from this point on the company enters a new phase associated with liquidity, security, transparency and a guarantee of financial settlement. The company is henceforth covered by the specialized press and effectively becomes a publicly-held company.

Step 7

The road show is an activity that the investment banks classify as pre-marketing. The sales team of the coordinating bank evaluate investor interest in the offer and develop a sensitivity with respect to the markets in which there should be demand, in a type of mapping for the road show.

An announcement is made to the market (called a “Market Announcement”) with respect to the launch of the offer, containing the characteristics of the operation.

Step 8

If high demand is expected for the shares that will be offered to the market, the company issuing the new stock, together with the placement pool hired, can establish that the sales price of the new shares will be made through a system known as bookbuilding.

In bookbuilding the issuer of the shares normally establishes minimum and maximum sales prices as a reference, and during the offer period those interested in buying make their reservations to purchase shares, indicating the number and the price they are willing to pay. After the public offer is closed, the best purchase offers are noted and defined, with sales service for these buyers.

Step 9

After registering with the CVM, the company can release its public offer. The start of distribution should be announced by means of a Public Distribution Announcement, published twice in a large circulation newspaper. A Secondary Distribution Notice is issued for secondary distribution on the stock exchange.

Step 10

For primary launch operations, investors underwrite new securities by filling out an underwriting list, according to the CVM model. For the secondary market, distribution by auction on the exchange is most common. Alternatives to the auction can be adopted, such as bank or employee account holders or efforts for greater distribution of the placement.

Once the securities are subscribed or effectively sold in the secondary market, the financial settlement is completed by the coordinating institution that does nothing more than pass the investor funds to the issuing company or shareholder. It may take some time to complete this operation, but once completed, the investor will receive confirmation of his/her subscription or, in the case of book entry shares, a transaction receipt.

Step 11

The market considers that a complete opening of the capital occurs with launch of shares to the public for trading on the exchange or in the over-the-counter market.

Step 12

Within fifteen days of completion of distribution, the coordinator of the operation should announce the closing of public distribution. The effective share subscription should be completed within six months of the preference period or, if there is none, from the date of the Extraordinary Shareholders’ Meeting (AGE) or Meeting of the Board of Directors (RCA) that decided upon the issuance. The capital increase will be cancelled if all shares are not placed with the public.

A management structure is also required for publicly-traded companies:

In addition, the companies must have a Fiscal Council that is responsible for advising the shareholders’ meeting on the proper behavior of company management. Its operation can be ongoing or when requested by shareholders.