As a first step towards becoming listed at Spotlight Stock Market a company needs to go through a due diligence. The review is made to ensure that the company meet the listing demands and if the information in the listing memorandum is relevant, correct, clear and sufficient. The information should be clear and extensive enough for an investor to use it as a basis for an investment decision.
The due diligence is thorough and asks a lot of the company. It is however well invested time and of big use for the company to be transparent, reviewed and to be more confident in relation to being ready for a life on the stock market. The review can also reduce the risk as Spotlight has gone through all relevant information about the company. The result of the review is a report that along with the company’s listing memorandum or prospectus is the basis for Spotlight’s listing committee’s decision whether the company can be listed or not.
Briefly, the due diligence consists of the following steps:
Review of the company
Spotlight review the company with a special focus on its business model, organization/competencies, ownership structure, financial and commercial status, and valuation. The company must meet the stock market’s information requirements and otherwise conduct itself properly and professionally and exhibit sound judgment. Regarding the business model, it is primarily the job of the market to determine whether the model is sustainable and commercially viable. The business model – and the company’s valuation as assessed by Spotlight – must be reasonable, however. The business must have made it off the drawing board. Depending on whether it is in the development stage or has a finished product on the market, the company will face different status requirements. Regardless, however, it must be able to present two audited annual reports.
We personally review the following individuals:
The review comprises the following:
Review of prospectus or listing memorandum
Spotlight determine whether the company’s prospectus or listing memorandum meets Spotlight’s requirements according to a memorandum checklist. The requirements essentially correspond to those for prospectuses but are more substantial. We attach special importance to the descriptions of the company’s business model, commercial and financial status, and valuation. Other important areas include equal treatment of stockholders, including the allocation principles used in share issues, and, where applicable, related party transactions.
The listing process normally consists of the following steps:
During preliminary contacts, the company provides basic information on its operating activities, business model, commercial and financial status, and valuation. The purpose is to identify at an early stage any non-compliance or important issues that must be addressed before the company can be listed. If it is determined that the company does not meet the listing requirements, it is informed of this. At this meeting we usually discuss timelines and specific listing requirements.
Preparation of due diligence report and listing memorandum
A report is the result of Spotlight's completion of the reviewing the company. The listing memorandum or prospectus is reviewed by Spotlight and is a part of the report.
Meeting with the Listing Committee
Spotlight’s Listing Committee examines the review report and listing memorandum/prospectus and decides whether the company can be listed. The Listing Committee is comprised of various employees of Spotlight, including Spotlight’s COO, head of listings and Deputy Head of Market Surveillance.
Start of trading
If the Listing Committee has given its approval to a company becoming listed, the trading can commence within a few days. Often the company will issue shares in connection with a listing to spread its ownership. In such cases the issue must be completed before trading can begin. Often this decision is stipulated and the company must address certain issues before trading can begin.