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Crypto IPO in the Nordics: A lawyer's perspective

Crypto IPO in the Nordics: A lawyer's perspective

Europe's tech ecosystem has been on fire this year and is on track to beat all previous records in funding raised by startups across the continent. Same is true for public listings: at the beginning of the year, we counted more than 30 companies that planned to float through an IPO, public listing, or SPACs. Since then, most of the listings have either happened or received official timelines.

One particular vertical where companies increasingly turn to the public markets for cash and recognition is the crypto industry. It seems like the time of largely unregulated initial coin offerings (ICO) has gone forever, while equity funding and public listings of startups working with crypto, blockchain, and/or DeFi have been growing through the last couple of years.

Karola Kassai, whose firm KassaiLaw supported the recent heavily oversubscribed €4 million IPO of Sweden-based Safello, is bullish on the future of companies from the crypto space on the public markets.

“If you dig deeper and read the data, you'll see that the markets are reacting better and better to crypto thanks to big IPOs like that of Coinbase,” said Kassai. “I feel like this year a lot of groundwork has been laid, and not just in the US. The authorities in the Nordics, as well as exchanges like Nasdaq First North Growth Market where Safello went public, are reacting to these listings much better.”

We've sat down with Kassai to put together some essential advice for European crypto firms planning to go public on the continent.

Explain the crypto space

When you work in crypto, it may seem that everyone around you has at least basic understanding of the industry and its inner workings. In the world of public markets, that's not really the case, warns Kassai.

“You still need to explain the space thoroughly to investors, it requires a significantly more comprehensive introduction than other verticals,” she said. “You need to explain how things work, the volatility of cryptocurrencies. The market is interested, but still cautious.”

As more crypto companies go public, investors become increasingly more savvy and relaxed around them. The industry, however, is not going to become as ubiquitous as e-commerce or traditional fintech any time soon, so make sure you've dedicated space in your prospectus to a coherent primer on blockchain, tokens, distributed ledgers, NFTs, proofs of work, and everything in between.

Make sure you've got enough money

You have to spend money to make money — this maxim rings as true in the IPO world as it does in everyday life. Companies get listed on the stock exchange to raise money, but going public is an expensive affair in itself. Between an army of lawyers and advisors, underwriters, and regulatory fees, it can easily set you back some €500,000 or more.

With that in mind, make sure you've got enough money in your coffers to pay all the expenses and see the company through at least the first few months after the listing takes place. In practice, it's a widespread practice for unicorns and more modestly priced tech businesses alike to raise a pre-IPO funding round for this exact purpose.

Be prepared to delegate a lot

Money is not the only resource that fuels a successful IPO. What's even more important is the time and focus of the company's top managers, particularly the CEO and CFO. It's not a figure of speech: for several months, both of them will have to spend all their time on preparing for the listing.

Having two of the most important people in the company focused on something other than actually running the business can be a serious challenge for a smaller team, warns Kassai. Even more so since it also takes two to three full-time employees on top of that to complete the preparation process.

What this all means in practice is that by the time you decide to go public, your company's operations need to run as smoothly as possible. In addition to that, make sure there are people the CEO and CFO can delegate (most of) their tasks to in order to attend to the IPO process.

Karola Kassai

Get good lawyers

Going public is a process that no company can do alone, and a big part of its success depends on the people from outside the company who help you along the way. In the centre of this group beside the certified advisor is the law firm that you'll hire to guide you through this challenge and deliver the organisation to the exchange, perfectly healthy and fully compliant.

The work that the IPO lawyers are doing is similar to playing multidimensional chess with a whole bunch of regulators and other involved parties, like the exchange itself. Every player in this game sends down a list of requirements that the company needs to comply with in terms of its structure, policies, financial reporting, etc.

The job of the lawyers is to find a way to comply with every single one of them, while also keeping everyone updated about any changes, all along bearing the actual business purposes in mind. This is a crucial task that requires a deep understanding of the IPO process, as well as operational and project management prowess.

Think about timing

Forecasting the market climate for the next six months is almost an impossible task, especially in volatile markets like crypto, and yet this is what a leader who's taking their company public needs to do. The situation around a certain industry and the disposition of investors in a certain geography can play a key role in the overall success of the listing.

Although no one can predict what the next tweet of Elon Musk would be (least of all himself, it seems), there are always long-term trends at play that could and should be properly analysed before the final decision to list is made.

“But perhaps more important than everything else is to understand that the IPO listing day isn't the finish line of a journey,” Kassai said. “Taking your company public is actually when the real work begins.”

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