An Initial Public Offering (IPO) is a way to seek value in the stock market for the company and its shareholders, in addition to opening the possibility for new investors to arrive.
So Citi must begin to carry out the regulatory processes to carry out the IPO within the agreed time frame.
What steps does Banamex have to follow to go public?
The first thing is that Citigroup divides the business into two parts: Citi Mexico and Banamex. Since the businesses operate separately, Banamex has to find a brokerage firm or placement trustee to help it get listed.
“You must have advice from a placement intermediary and that intermediary will make a valuation according to the flows,” said Almudena Ruíz, director of Variable Income Management at Finamex.
Any company that wants to enter the stock market has to meet certain requirements such as certain years of operation, compliance with international financial standards in their accounting schemes, positive profits in recent years, and a corporate governance body, explained Gerardo Aparicio, director of financial culture at the BMV.
The specialist added that the companies that appear in an IPO do not have to be large, in fact thanks to the financing that is obtained in the stock market, it is how the company grows. “If the legal requirements are met, you can make an IPO and be a global conditions company,” he explained.
With the IPO of Banamex, not only Mexican investors will be able to buy shares of the bank, but also global investors.
How is the price of a company determined on the stock market?
In this case, Banamex will have to seek advice from an intermediary to help it decide on the best time to go out in an IPO.
This intermediary will also help the bank to set the price at which it will start listing on the Stock Market. Banamex must seek the help of an underwriter at another financial institution, although it can also use its own brokerage house, Accival, without this representing a conflict of interest. Using your own Brokerage House would help save on commissions.
Before going public, Banamex must hold a roadshow or an event in which it expresses to investors the future prospects of the business in order to attract resources.
What does it imply for the investor?
The brokerage firms will analyze the company, its growth expectations, the catalysts for growth, as well as its valuation.
“What is done is to see other companies in the sector that are already listed on the stock market and compare themselves with the company that is going to leave,” added Ruiz.
The expert said that the perspectives add the factors of competition in the sector, the economic situation and the prospects for that same sector.