FAQ

The pre-IPO financing concept

  • IPO is the acronym for Initial Public Offering. A stock market offering is a financial operation that consists of a company increasing its capital by the issue of new shares and/or historical shareholders selling their shares in connection with the initial listing of shares on a financial market. Invest Securities has been a leading player in IPOs of SMEs in Paris for the last fifteen years.
  • A stock market listing is the PRE-IPO platform’s preferred exit strategy for its operations. The stock market has the advantage of reconciling the different objectives, constraints and investment horizons of shareholders and company managers. Those who wish to sell can do so, those who wish to maintain their positions or reinforce them can equally do so. Additionally, a stock market listing does not rule out other types of operations at a later time (tender offer, merger, capital increases).
  • However, an IPO is not the only possible liquidity solution. An industry sale, LBO, private placement or even buyback of shares by the company also represent possible exits. PRE-IPO does not a priori rule out any alternative.
  • When the company is listed on the market, in order to avoid destabilising the share price, all the historical shareholders (including the Members of the platform) commit themselves to hold onto their shares over a period of a few months (the so-called lock-up period) in order to enable the market for the company’s shares to stabilise. This lock-up period does not concern investments in the form of bonds.

A pre-IPO investment or pre-IPO round is the last private fundraising round of a company before its IPO, which is planned for the short or medium term. 

On the PRE-IPO platform, these investments can take two forms:

  •  A bridge-type investment in bonds: for IPOs planned for the short term (less than 12 months), the investment is made through straight bonds, convertible bonds, bonds reimbursable in shares or bonds with attached equity warrants. All these bonds give access (through different mechanisms) to subscriptions to the company’s shares at a variable price and at a discount in the next fundraising round (private fundraising or IPO). These “bridge” type financing structures allow the postponing of the delicate question of the valuation of the company when its IPO is very near. However, these financing structures establish the discount that Members will automatically benefit from in the IPO. 
  • An equity investment along the lines of a capital increase. For companies that anticipate an IPO in over 12 months, investments will be in shares. In the large majority of cases, the subscriptions will be organised through a holding company set up to this effect. Investment over a longer horizon makes it easier to negotiate and precisely set the share price at present. The holding company structure enables the company to manage their life in the private equity phase much more easily over the interim and enables subscribers to be collectively represented and participate in future decisions. In this case, the potential exit horizon is at least two years away.
  • A company interested in a stock market listing must make extensive preparations (by reinforcing its management controls and management teams, adopting true corporate governance, in some cases establishing its financial accounts under IFRS international accounting standards for the first time and formalising its strategy and business model) and then must prepare the IPO itself. All this generally takes between one and two years.
  •  The companies selected by PRE-IPO are innovative companies with very strong growth strategies. They therefore invest heavily, very often far beyond their capacity for self-financing or bank borrowing. They therefore do not wish to slow or postpone investments planned over the period of preparation.
  • We would also add that it is sometimes necessary to wait a few months for stock market conditions to become more favourable for the IPO.
  • The need to significantly reinforce equity funds at the most attractive innovative European companies is very substantial, even after they have successfully completed the riskiest phases of their development and often even after they have turned profitable. These successes enable them to have high ambitions. An IPO will complete their sources of financing.
  • Pre-IPO investments are reputed to be in principle more liquid and less risky and to offer rapid returns on investment. 
  •  The liquidity outlook is obviously brighter than for the majority of unlisted companies, which are start-ups or family-controlled SMEs, even if this liquidity is not guaranteed. The companies that obtain stock market listings are among the most attractive and dynamic. They have generally successfully passed through the riskiest phases of their development (notably technical), even if their future growth still remains subject to several specific operational risks. They use their stock market listings in order to finance ambitious strategies and offer high potential for value creation. These potential capital gains come on top of the discount offered to Investors who invested prior to the IPO in connection with pre-IPO financing. Up until now, only the wealthiest clients of the major investment banks or private banks have had access to these fundraising rounds.

Companies eligible for pre-IPO financing are growing, innovative companies that need rapid stock market listings in order to finance their growth. PRE-IPO obtains from candidate companies (the future “Issuers”) all the documents and information needed to evaluate the proposed fundraising operation. PRE-IPO evaluates the coherence, clarity and balanced character of the information supplied by the Issuer and then conducts a critical review of this information, leading to the selection or refusal of the Issuer based on the following criteria:

  • the quality and experience of the management team - the innovative nature of the Issuer’s products or services 
  • the long-term protection of the intellectual property (patents, licences and brand names) 
  • the immediate or medium-term profitability of the business model - the size of the targeted market 
  •  the Issuer’s competitive position on its market
  • the progress in terms of the key phases of the Issuer’s technical and business development

PRE-IPO selects financing projects based on these criteria and the eligibility of the Issuer for a stock market listing over the short or medium-term depending on its business sector and growth profile. Only those financing projects selected at the end of this process are proposed to Investors on the Website.

The business of PRE-IPO

  • PRE-IPO is one of the activities of Invest Securities, an investment services provider certified and supervised by ACPR-Banque de France, notably in connection with its placement activities. Its mission is to select quality issuers and then to seek out subscribers to financial instruments issued by these issuers. 
  • Based on its financial expertise, PRE-IPO selects investment projects that will be open in a restricted manner to Investor clients whose profiles have been validated and approved by PRE-IPO (see below). PRE-IPO has the obligation to act in the best interest of its subscriber clients.
  • PRE-IPO is one of a number of French crowdfunding websites that have been developed recently. The majority of these crowdfunding websites (excluding charitable websites) involve the financing of start-ups or credit financing for SMEs. 
  • PRE-IPO is the only crowdfunding website targeting capital financing for companies slated to be taken public over the short or medium term, thereby offering Investors incomparable liquidity.

PRE-PO is remunerated in two ways: by the issuers and by the Investors. The remuneration model developed by PRE-IPO aims to align its interests with those of its clients, the issuers and Investors. Issuers only pay as a function of the success of fundraising rounds. Investors only pay when exiting their investment. PRE-IPO therefore has every interest in paying extremely close attention to the quality of its proposed operations. 

For the issuers PRE-IPO receives remuneration from the issuers in connection with the realisation of fundraising rounds presented to Investors. This remuneration is proportional to the sums effectively raised. This remuneration, which varies between the different projects, equals between 5% and 8% of the sums raised and depends on the size and complexity of the proposed projects. 

For the Investors Registration and subscriptions on PRE-IPO are free for Investors. PRE-IPO is remunerated by the Investors in connection with the sale or reimbursement of their securities. PRE-IPO will receive a Disinvestment Commission equal to 4% all taxes included of the gross amount of the sale or reimbursement of the Investor’s securities. This Disinvestment Commission will be deducted, the case being, from the Performance Commission detailed below. The Performance Commission will equal 20% of the potential capital gain recorded by the Investor after deduction of the Disinvestment Commission described above. In the case where INVEST SECURITIES (operator of the PRE-IPO platform) manages the IPO of the Issuer, PRE-IPO will not receive the Performance Commission in order to avoid any potential conflict of interest. In this case, only the Disinvestment Commission will be charged.

The INVEST SECURITIES group

INVEST SECURITIES is an independent, diversified financial services group with offices in Paris, Brussels, Hong Kong and Beijing. The group currently has 110 employees. Overseen a holding company certified by the Banque de France as a Financial Company, the group is engaged in three principal activities:

  • a company finance, mergers and acquisition, stock market listing and financing advisory activity within INVEST SECURITIES CORPORATE SAS, a company certified by EURONEXT as a Listing Sponsor - a portfolio management and asset management activity within AMPLEGEST SA, a company certified by the Autorité des Marchés Financiers as an Investment Management Company
  •  a brokerage, order execution, placement and financial analysis activity within INVEST SECURITIES SA, a company certified by the Autorité de Contrôle Prudentiel et de Résolution as an Investment Services Provider The PRE-IPO platform is operated by INVEST SECURITIES SA.

Each activity and each entity of the Invest Securities Group is subject to rules relating to its independence (Chinese walls) and permanent internal and periodic external supervision, notably by the different supervisory authorities. As a certified Investment Services Provider, Invest Securities has established and maintained up to date an organisational structure and administrative procedures in order to take all reasonable measures to identify, supervise and manage potential conflicts of interest that could arise in connection with its activities. Nevertheless, if a conflict of interests arises relating to a project proposed on the PRE-IPO platform, the Investors will be informed of this conflict of interest.

The PRE-IPO platform

The PRE-IPO platform is a website operated by Invest Securities that gives the Investors access to investment opportunities selected by Invest Securities. This website is designed to be a crowdfunding website, i.e. featuring restricted access to the details of the financing operations and reserved for validated and approved Investors (see below).

The PRE-IPO platform limits the access to the detailed presentation of the different investment projects to potential Investors who have reviewed and expressly accepted the risks to which they are exposing themselves (see below).

In order to be able to access the detailed information relating to an investment project, the Investor must create an Investor account and have: 

  • An identify profile validated by PRE-IPO, i.e. have supplied a valid identity document and proof of address that have been verified 
  • Completed an appropriateness questionnaire with questions relating the family, patrimonial and professional situation of the Investor, his or her experience and knowledge concerning financial matters and his or her objectives. Investors that are legal persons will have to supply their financial accounts and bylaws. These questions enable the evaluation of Investor Profiles in light of their risk aversion and understanding of the risk inherent in the type of offers selected by the platform and enable the confirmation of whether or not the type of investments is effectively adapted to the Investor Profile.
  • Expressly agreed to the general terms and conditions of the PRE-IPO platform 
  • Signed the investment advisor agreement - Expressly accepted the risk to which her or she is exposing him or herself 
  • Been approved by the issuer or by delegation by PRE-IPO.

A Visitor without a validated and approved account will only have access to a brief presentation of the project to be financed (name of the issuers or code name if the issuer so desires and a brief description of its business, the amount being sought, the date of closing of subscriptions or intentions of subscriptions).

The detailed information notably includes (art. 217-1 of the AMF general regulations):

  1. A description of its business and its project accompanied by the most recent financial accounts, business forecasts and an organisation chart detailing the management team and shareholders 
  2. Information concerning the level of participation in the proposed offer to which the issuer’s management team has committed itself 
  3. Exhaustive information concerning all the rights attached to the securities offered in the proposed offer (voting rights, financial rights and information rights) 
  4. Exhaustive information concerning all the rights (voting rights, financial rights and information rights) attached to securities and categories of securities not offered in the proposed offer and the categories of holders of these securities 
  5. A description of the terms of the bylaws or shareholders agreement concerning the liquidity of the securities or an explicit mention of the lack of such terms 
  6. The conditions under which copies of the registration of the individual accounts of the Investors on the books of the issuer confirming the ownership of their investment will be delivered 
  7. A description of the specific risks of the issuer’s business and project 
  8. A copy of the reports of corporate bodies in connection with the previous and current year general shareholders meetings as well as, the case being, a copy of the report(s) of the statutory auditor(s) concerning the previous and current year financial accounts. The issuer company is responsible for the complete, accurate and balanced character of the information supplied.

Professional clients are clients with the experience, knowledge and abilities needed to make their own decisions and correctly evaluate the risks assumed. 

  • The Profile and appropriateness questionnaire of PRE-IPO allows the evaluation of the professional nature of a client. 
  • Assumed to be competent and familiar with the financial markets, professional clients receive less protection than non-professional clients. 
  • Clients meeting the criteria defined in article D 533-11 of the Monetary and Financial Code can request to be treated as non-professional clients and investment services providers can accept to provide them with a greater degree of protection under the conditions set out in the Autorité des marchés financiers general regulations.

The investments accessible on PRE-IPO, like any financing involving unlisted companies, involve several risks, notably the risk of a total or partial loss of capital, the risk of illiquidity and the risk of an absence of valuation. These risks stem from varied factors, notably including :

  • economic, political or international conditions 
  • the dynamics of financial markets 
  • the validity of the company’s strategic project 
  • the quality of the management team

My Investments

The minimum investment amount has been set at €2,500 in order to avoid an excessive dispersion of the shareholder structure of the issuing company. 

This minimum amount can be increased in certain operations as a result of negotiations with the issuer or the placement procedure chosen.

If you are a natural person residing in France, several tax shelter possibilities can be imagined: 

You can potential benefit from the partial deductibility of your investment from income tax or the wealth tax

You can also invest in the proposed operations through a share savings plan or a SME share savings plan depending on the case We advise you to consult with a tax professional in order to select the tax treatment adapted to your situation and the investment under consideration. Information is provided for each operation concerning its eligibility for the different tax measures.

It is generally recommended to invest up no more than 10% of your net wealth in unlisted companies.

The targeted duration of the proposed investments can vary between one and three years. This time period can be longer depending on the time needed to list the company on the stock market under good conditions and to sell the shares on the market without destabilising it. If you have opted for the tax benefits of an investment in an SME in terms of income tax or the wealth tax, you will be obliged to hold your shares for at least five years.

The company could effectively temporarily abandon its IPO project, for example due to unfavourable market conditions. Note that our eligible companies are innovative growth companies that need external financing for their development. In this case, another solution will be found to assure the financing of the company’s development. This could take the form of a capital increase subscribed to by one or several investment funds or equity backing from a major company. Concerning Investor exits, the shareholders agreements negotiated by PRE-IPO for each operation also include four-year rendez-vous clauses that oblige the companies, their managers and principal shareholders to use their best efforts to find an alternative liquidity solution (industry sale, refinancing, LBO, placement of minority stakes etc.).

By the nature of pre-IPO financing, the investment can only be returned after the company is listed on the stock market and potentially after a lock-up period. However, certain issuers could allow sales before the IPO.

Companies preparing for an IPO and using pre-IPO financing generally do not pay dividends, as they are in a phase of strong growth that requires the financing of investments.

For the equity operations, you will be able to participate in the annual general meetings either of the issuer or the holding company covering the Members of PRE-IPO. Information concerning the issuer’s operations will additionally be regularly supplied to Investors.

For certain operations, the fundraising round is conditioned on reaching a minimum amount. If this amount is not reached, the operation will be cancelled and all the funds paid in will be immediately returned to the Investors without any costs.

The PRE-IPO account

The creation of an account is exclusively reserved to legal adults who are not under the protection of a tutor or guardian or under judicial protection.
In order to close your account, you must submit the request to contact@pre-ipo.com. You will no longer have access to detailed information concerning operations if your Investor Profile had been validated and you will no longer receives updates concerning the PRE-IPO platform. Keep in mind however that your personal information will be conserved for the legal duration in order to keep you informed regarding previous operations in which you have invested and to enable PRE-IPO to respond to any request from legal authorities.
Any registered member on the platform, and whom is approved as an Investor Member has to update his personal information on his profile. Any member who has access to the documents of an operations commit to a strict confidentiality concerning these documents and the non-public informations they contain.