If you are the manager of a company with growth potential and are considering the next step in financing its expansion, the IPO process deserves your full attention.
For Romanian entrepreneurs, an Initial Public Offering (IPO) is not only a financial instrument but also a strategic lever that fundamentally changes the way your business accesses capital and positions itself in the capital market. This article, which we invite you to read, provides a clear and practical overview of the entire process, tailored to the Romanian market context.
Summary
- An IPO is the process through which a private company goes public and raises capital from investors by selling shares. This step transforms the company into a publicly listed entity, providing greater access to financing and increased visibility.
- The Bucharest Stock Exchange (BVB) offers significant opportunities for Romanian companies, particularly through the AeRO market segment dedicated to SMEs. Romania’s status as an emerging market has increased investor interest and improved access to external capital.
- Going public involves meeting clear requirements: the company must ensure financial transparency, have audited financial statements, an appropriate governance structure, and documentation approved by both the Financial Supervisory Authority (ASF) and the Bucharest Stock Exchange (BVB).
- The IPO process includes several stages: selecting advisors, preparing the prospectus, conducting the share subscription process, and obtaining admission to trading. Financial intermediaries and investment banks play a central role in the success of the offering.
- An IPO offers significant strategic benefits, including access to capital for growth, enhanced credibility, and liquidity for shareholders. However, it also comes with challenges, such as high costs, transparency obligations, and ongoing pressure from the market and investors.
Table of Contents
- What is an IPO and how does an Initial Public Offering work?
- What is an IPO (Initial Public Offering)?
- The fundamental stages of an IPO
- The Capital Market and Stock Market Investments in Romania: Opportunities for entrepreneurs
- Why list your company on the Bucharest Stock Exchange (BVB)?
- Requirements for listing on the Bucharest Stock Exchange
- Listing requirements and conditions across different market segments
- The subscription process and the offering prospectus
- How does the share subscription process work and what does IPO underwriting mean?
- The strategic benefits of an IPO for your company
- Challenges and other important considerations in the listing process
What is an IPO and how does an Initial Public Offering work
The Initial Public Offering (IPO) is a strategic decision that can fundamentally transform the way your business accesses capital, builds credibility, and positions itself in the capital market. Let us take a closer look at this concept and explore the role an IPO plays in securing the financing required for a growing company:
What Is an IPO (Initial Public Offering)?
An Initial Public Offering (IPO) is the process through which a private company offers its shares to the general public for the first time, thereby becoming a publicly listed company.
In practice, through an IPO, your company issues new shares or offers existing shares for sale, allowing external investors to become shareholders and participate in the growth of the business.
The Fundamental Stages of an IPO
- Engaging Advisors: The company works with financial advisors, legal counsel, and investment banks that assess the value of the business and structure the offering.
- Preparing the Prospectus: The central IPO document is drafted, providing detailed information about the company’s financial position, business model, and associated risks.
- Subscription Period: Investors can place orders to purchase shares on the stock exchange at the established offering price.
- Admission to Trading: The shares are officially admitted to trading on the stock exchange.
By going public, your company is no longer a private entity with limited access to capital—it becomes a visible participant in the capital market, with access to a broad base of institutional and individual investors. This transformation brings both significant opportunities and new responsibilities related to transparency and corporate governance.
Practical Example:
A technology company with eight years of operating history decided to list on the Main Market of the Bucharest Stock Exchange without first engaging a specialized financial advisor. The management team prepared the prospectus on its own, relying on publicly available templates. Over a six-month period, the Financial Supervisory Authority (ASF) requested three rounds of clarifications and additional disclosures. During this time, market conditions deteriorated, and investor appetite for new IPOs declined significantly. The company eventually completed the listing, but at a valuation 30% lower than initially estimated.
Financial advisors are not an optional expense in the IPO process, they are the professionals who understand ASF’s acceptance thresholds, realistic timelines, and the book-building mechanisms that ultimately determine the final offering price.
The Capital Market and Stock Market Investments in Romania: Opportunities for Entrepreneurs
The Bucharest Stock Exchange (BVB) has undergone remarkable development in recent years, strengthening its position as an emerging market and attracting an increasing number of international institutional investors.
Romania’s promotion to emerging market status by FTSE Russell in September 2019, followed by its effective inclusion in the Emerging Markets indices on September 21, 2020, marked a significant milestone. This development increased the visibility of listed companies and brought new capital inflows from international investors.
For you, as an entrepreneur leading a growing business, the Romanian capital market offers tangible opportunities that other sources of financing cannot match.
- By listing on the Bucharest Stock Exchange (BVB), you can access capital from thousands of investors simultaneously, without relying on a single lender or investment fund.
- The AeRO market segment, dedicated to small and medium-sized enterprises, has become an accessible entry point for entrepreneurs who do not yet meet the requirements of the Main Market.
- Romanian companies across various sectors, including energy, technology, retail, and agriculture, have demonstrated that the local market can successfully support IPOs.
- Examples such as Hidroelectrica, the largest IPO in the history of the BVB, as well as listings from the technology sector, have shown that there is genuine investor appetite for stock market investments in Romania based on strong and well-established companies.
Without a doubt, the capital market offers significant financing and growth opportunities, enabling you to accelerate your company’s development and strengthen its position relative to competitors.
Why list your company on the Bucharest Stock Exchange (BVB)?
- Access to diversified capital: You can raise funds from thousands of investors simultaneously, without relying on a single lender or investment fund.
- The AeRO market segment: An accessible entry point for SMEs that do not yet meet the requirements of the Main Market.
- Recognized emerging market status: FTSE Russell’s 2020 classification provides international visibility and attracts capital flows from foreign investors.
- Proximity to local investors: Romanian investors understand the economic environment and the industry in which you operate, facilitating long-term relationships.
Requirements for Listing on the Bucharest Stock Exchange (BVB)
Before starting the IPO process, it is essential to determine whether your company meets the listing requirements imposed by the Bucharest Stock Exchange (BVB) and the Financial Supervisory Authority (ASF).
The requirements vary depending on the target market segment: the Main Market or the AeRO market segment.
Listing requirements and conditions across different market segments
On the Main Market, the minimum market capitalization requirement is at least EUR 1 million, and the company must have a financial track record covering a minimum of three years. The free float—the percentage of shares available to the public—must be at least 25%, and the central offering document is the prospectus approved by the Financial Supervisory Authority (ASF). Corporate governance requirements include a functioning board of directors with clearly defined decision-making and oversight structures.
The AeRO market segment operates under more accessible rules, as it is specifically designed for small and medium-sized enterprises. There is no minimum market capitalization threshold, and instead of a three-year operating history, companies are required to provide audited financial statements—a criterion that is generally easier for younger businesses to meet. The accepted free float may be lower than on the Main Market, the offering document is a memorandum approved by the Bucharest Stock Exchange (BVB), and the required governance structure remains at a basic level, without the more extensive requirements applicable to the Main Market.
From a legal perspective, the company must be incorporated as a joint-stock company (SA) and have its financial statements audited by an authorized independent auditor.
Operational readiness requires the implementation of robust financial reporting systems, clear investor communication policies, and a dedicated Investor Relations (IR) department or officer.
Last but not least, it is clear that going public is a gateway to accessing capital, but it also requires the business to already operate with a high level of transparency toward shareholders and regulatory authorities.
Practical example:
An agricultural equipment manufacturer with annual revenues of EUR 4 million and three years of audited financial statements evaluated both available market segments. On the Main Market, the minimum free float requirement of 25% would have resulted in significant dilution of the founder’s ownership stake, while the ASF-approved prospectus would have involved estimated legal costs of EUR 80,000–120,000. The AeRO market segment allowed for a lower free float, a BVB-approved memorandum instead of an ASF prospectus, and total preparation costs approximately 40% lower.
The company ultimately listed on the AeRO market, raised EUR 1.2 million in just 12 days of subscription, and used the capital to acquire a new processing machine that increased its production capacity by 60% during the first year. AeRO is not a compromise solution, it is a market segment specifically designed for companies at this stage of development.
Procesul de subscriere și prospectul de emisiune The subscription process and the offering prospectus
The offering prospectus is the central document of any IPO and must contain complete and verifiable information about the company, including:
- the company’s operating history;
- the shareholder structure;
- audited financial statements for the previous years;;
- the strategy for the use of the funds raised;
- risk factors;
- the structure of the offering.
The Financial Supervisory Authority (ASF) reviews the prospectus and may request clarifications or additional information before granting approval. The quality and transparency of this document directly influence investor confidence.
How does the share subscription process work and what does IPO underwriting mean?
- Prospectus Approval: The Financial Supervisory Authority (ASF) approves the prospectus after reviewing the document and, where necessary, requesting clarifications or additional information.
- Share Subscription Period: This typically lasts between 5 and 15 business days, during which investors can submit subscription orders through authorized intermediaries.
- Determination of the Offering Price: The price may be set at a fixed level or through a book-building process, where the final price is determined based on investor demand.
- Share Allocation: If demand exceeds the number of shares offered, a proportional allocation mechanism is applied. If the offering is undersubscribed, the intermediary may step in to cover the shortfall.
The role of intermediaries, whether investment banks or financial investment services companies (SSIFs), is critical in the IPO process.
They provide IPO underwriting services, meaning they help guarantee the successful placement of shares on the stock exchange, and coordinate the entire investor outreach campaign, including roadshows, during which the company’s management team presents the investment opportunity to potential institutional investors.
To successfully navigate these stages, comprehensive support throughout the Initial Public Offering process, from documentation preparation to investor engagement strategies, can make the difference between a successful IPO and an unsuccessful one.
The strategic benefits of an IPO for your company
The decision to list your company on the stock exchange brings a range of strategic advantages that go far beyond simply raising capital. Understanding these benefits will help you assess whether an IPO is the right instrument for your business at its current stage of development.
Access to capital for expansion
- Through an IPO, you can raise significant amounts of capital from a broad base of investors without taking on debt and without giving up control to a single strategic partner.
- The capital raised can be used to finance acquisitions, geographic expansion, investments in production capacity, or the development of new products and services.
Credibility and market visibility
- A company listed on the Bucharest Stock Exchange (BVB) benefits from media exposure and institutional recognition that private companies cannot achieve to the same extent.
- Business partners, suppliers, and customers tend to perceive a listed company as more stable and transparent, which can facilitate the negotiation of more favorable terms in commercial relationships.
Improved corporate governance
- The reporting and transparency requirements imposed by the Bucharest Stock Exchange (BVB) and the Financial Supervisory Authority (ASF) drive the implementation of more rigorous internal processes, more effective internal control systems, and an organizational culture focused on measurable performance.
- These improvements generate long-term benefits, regardless of the future performance of the company’s share price.
Liquidity and talent retention
- Listing provides a liquidity mechanism for existing shareholders.
- In addition, it is a powerful tool for talent retention through employee share programs, which are essential for business growth.
Financial flexibility
- There is no obligation to repay the capital raised.
- The company is not constrained by restrictive banking covenants, allowing it to make long-term strategic decisions without the pressure of periodic repayments.
If scaling your business over the long term is a priority, understanding the steps toward sustainable growth provides the perspective needed to integrate an IPO into your overall development strategy.
Challenges and other important considerations in the listing process
Although the benefits are substantial, the IPO process comes with a number of real challenges that must be anticipated and carefully managed. Ignoring them can turn a strategic opportunity into a costly and exhausting experience.
Significant listing costs
- The costs associated with an IPO include the fees of financial intermediaries (typically 4–7% of the offering value or 3% in specific large-scale or European contexts), legal fees, audit costs, BVB and ASF fees, as well as marketing and communication expenses related to the roadshow.
- These are complemented by the recurring operational costs of being a listed company: periodic reporting, annual audits, ongoing investor communication, and regulatory compliance.
Mandatory transparency
- An entrepreneur accustomed to making decisions quickly and discreetly will discover that a listed company must publicly disclose information regarding its financial performance, business strategy, related-party transactions, and any significant event that may influence the share price.
- This level of exposure can be uncomfortable and may provide competitors with valuable information.
Short-term market pressure
- Investors and analysts closely monitor quarterly results and may react negatively to any deviation from expectations, even if the company’s long-term strategy remains sound.
- Managing this pressure requires proactive and consistent communication with the capital market.
Understanding all the financing options available to your company helps you assess whether an IPO is the most suitable option at this stage or whether other instruments may be better aligned with your current phase of development.
An IPO is one of the most powerful financing and growth tools available to entrepreneurs. If your business has strong fundamentals, a scalable business model, and a capable management team, listing on the Bucharest Stock Exchange can dramatically accelerate its growth trajectory.
An honest assessment of the company’s readiness, the selection of the right team of advisors, and a patient approach to the process are essential. Success in the capital market is built long before the day of the listing.
References:
- ANGHELACHE, G. (2004). Capital Market: Characteristics, Developments, Transactions. Romania: Economic Publishing House.
- Espinasse, P. (2014). IPO: A Global Guide (2nd ed.). Hong Kong University Press.
- Monks, R. A. G., & Minow, N. (2004). Corporate Governance. United Kingdom: Blackwell Publishing.
