Private Placement, an Outstanding Financing Tool for Companies

Companies looking for long-term financing, have you thought about private placements? This type of financing was very popular in 2010 and 2011 on NYSE Euronext and NYSE Alternext, with a total of more than 60 operations in all. In a financial environment where companies must find secure sources of long-term financing, this approach has clear advantages. Private placements can be used in addition to equity increases with rights issue, but limits calendar restrictions and market exposure.

Mostly, companies can negotiate with institutional investors of their choosing and complete the operation without deadlines or exposure restrictions. The price of the new shares must be at least within the average of the three previous market days, with a maximum 5% discount or decided otherwise by the shareholders' meeting, up to 10% of total equity. For offers greater than 10% of the total number of shares listed, the prospectus is still necessary, so updating the reference document each year allows better responsiveness for undertaking this type of operation. There is no minimum for a private placement, which leaves room for real flexibility.

"Many operations have been carried out by SME-ISEs over the past two years, demonstrating that private placement in stock or OCEANE convertible bonds is particularly useful for listed SMEs that want to choose their shareholders: family offices, private equity, industrial firms, etc. By selecting qualified investors or a restricted circle of investors, the company limits its exposure to economic volatility, unlike a public offer with a traditional rights issue. Much larger companies may benefit from a different type of advantage: "They can limit the period of the offer to three days by combining accelerated book building with qualified investors with a public offer at the same price at the same time, to comply with the price restrictions related to public offers without rights issue," explains François Houssin, Head of Client Coverage France for NYSE Euronext.

Information about this flexible and effective tool is essential at a time when companies are facing difficult credit conditions. Banks are limiting their capacity to finance the economy in response to the new Basel III regulations, and NYSE Euronext has increased its efforts to support listed companies in their search for financing in this environment.