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The Polish Stock Exchange and NewConnect

Publication date: February 05, 2025

The Warsaw Stock Exchange (WSE) and NewConnect are key elements of the Polish capital market, enabling investors to trade securities and supporting companies in raising capital for development. The WSE is a regulated market where large and mature companies are listed, while NewConnect serves as an alternative market dedicated to young, dynamically developing companies. Both of these markets have their own specific rules, procedures and requirements that companies applying for a debut must meet.

The aim of this article is to present the differences between WSE and NewConnect, to discuss the conditions and procedures for companies to enter both markets and to present key aspects, such as the role of the prospectus, information obligations, benefits and risks related to being listed on the stock exchange. The article is a compendium of knowledge for both entrepreneurs planning to debut on the capital market and for investors who want to better understand the functioning of these two key financial markets.

What is the Stock Exchange and NewConnect?

Definition and role of the Warsaw Stock Exchange in the Polish economy

How to start investing in the stock market?

Opening a brokerage account

The first step is to choose a brokerage house or investment platform. Then, you need to open an investment account, which requires filling out a registration form and verifying your identity. Many brokerages allow you to set up an account online, which significantly speeds up the process.

Funding your investment account

After opening an account, it is necessary to transfer funds to it. These funds will be used to purchase stocks, bonds or other financial instruments available on the stock exchange.

Placing buy and sell orders

After activating and topping up the account, the investor can place orders to buy or sell financial instruments. Depending on their preferences, the investor can choose company shares, ETF funds, bonds or other securities. The order placement process takes place via a trading platform provided by the broker.

The WSE is a regulated market where we have a transaction of buying and selling the aforementioned financial interests, which consist of securities, shares or bonds. Its role is significant for the economy because it allows companies to obtain funds for the development of their activities by issuing shares and bonds. You can also allocate your capital or read the current value of companies from it, thus allowing investors, managers and market analysts to assess the financial condition of companies.

What is NewConnect ? – Market specifics and its purpose

NewConnect is an alternative securities trading market that was launched on August 30, 2007 by the Warsaw Stock Exchange. It operates outside the regulated market, similar to the AIM markets in London or First North in the Scandinavian OMX group. Its main goal is to enable young, dynamically developing companies – especially in the new technology sector – to obtain capital for the development of their operations.

On the NewConnect market, the decision regarding the selection of the quotation system is made exclusively by the company. There are two order systems, including the “order-driven system”, which allows for continuous or uniform quotation with two fixings. And also the “price-driven system”, where the quotation system is continuous, and maintaining the liquidity of trading is handled by Market Makers, who constantly issue new purchase and sale offers, in which they are a party to the transaction.

Differences between WSE and NewConnect

First of all, the main goal of the Warsaw Stock Exchange is to provide access to capital for large, mature companies and to create a safe market for institutional and individual investors, while NewConnect is a market dedicated primarily to young, in other words new companies that want to develop dynamically. Most often, these are companies from the new technology sector that need to quickly raise capital. The Warsaw Stock Exchange involves high costs, around PLN 4.5 million, while NewConnect is much cheaper, because the cost of entering this alternative market is only PLN 220 thousand. Another important piece of information is the fact that NewConnect does not require a so-called prospectus, i.e. a detailed report submitted to the Polish Financial Supervision Authority in order to obtain approval and enable public trading in the offered financial instruments.

Stock exchange listing conditions and procedures

Basic legal acts of public offering in Poland

Act of 29 July 2005 on public offering

It regulates the principles of conducting a public offering, the conditions for introducing financial instruments to trading on the regulated market and the obligations of issuers and other capital market participants.

Act of 25 July 2005 on Trading in Financial Instruments

It defines the structure and organisation of the capital market in Poland, including obligations related to supervision and participation in trading in financial instruments.

Commercial Companies Code (Act of 15 September 2000)

It contains provisions on the functioning of joint-stock companies, including the procedures for issuing shares and transforming companies in order to obtain the status of an issuer.

Commission Regulation (EC) No 809/2004 of 29 April 2004

It specifies the minimum scope of information contained in prospectuses and their form, publication and method of distribution.

Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003

Harmonizes prospectus requirements in European Union member states.

Formal requirements for companies

The main formal requirement is an appropriate legal form enabling trading in securities on the stock exchange.

Companies that can issue securities are:

Joint-stock companies, a form of business activity in which the share capital is divided into shares. Shareholders are not personally liable for the company’s obligations, and their risk is limited to the value of the shares held. This is a form of company intended mainly for large enterprises, especially those planning to enter the stock exchange. The characteristic features of this company are the minimum share capital, which is PLN 100,000, the obligation to keep full accounting and the requirement to have appropriate bodies.

A limited joint-stock partnership, or a commercial partnership that combines the features of a limited partnership and a joint-stock company. It is a legal form that does not have legal personality, but has legal capacity, which means that it can acquire rights, incur obligations and sue or be sued in its own name. The features are: Share capital of at least PLN 50,000, two groups of partners, including general partners and shareholders, as well as liability with all of their assets by general partners, while shareholders are protected from financial liability beyond the contribution made.

The last company is a simple joint-stock company, which is in force from July 1, 2021.

Its main features are primarily a low share capital of at least PLN 1. Shares in a simple joint-stock company have no nominal value, and contributions to the company can take various forms, including providing work or services. The shareholder register is kept in digital form, which allows for a quick and easy exchange of shares. Thanks to its flexible operating rules, a simple joint-stock company is an attractive form of activity for startups and innovative enterprises.

Stages of introducing a company to the WSE

Listing a company on the Stock Exchange consists of several key steps that are mandatory in order to go through the entire process safely and legally:

The company decides to enter the WSE

The company and its shareholders make the decision to list on the stock exchange, specifying the objectives of the share issue, the scale of the offering and the shareholder structure.

Analysis of the company’s financial situation and preparation of internal procedures.

Preparation of documents

Preparation and approval of the prospectus, which is a key document describing the company’s activities, its financial results, issue objectives and investment risks.

If necessary, the company must change its legal form (e.g. transformation of a limited liability company into a joint-stock company).

The next step is the approval of the prospectus by the Polish Financial Supervision Authority.

Report to the National Depository for Securities (KDPW)

The shares must be registered with the National Depository for Securities (KDPW), which is a necessary condition for their listing on the stock exchange.

Registration involves dematerialization of shares, which means that the shares do not have paper form but function as an electronic record.

After successfully completing the previous steps, the shares are admitted to trading on the WSE and the Stock Exchange Debut takes place, i.e. the first day of trading of the company’s shares on the WSE.

The prospectus and its role

The prospectus is a key document prepared by the issuer of securities when planning to introduce them to stock exchange trading. This document contains detailed information about the company, its activities, management, financial results, development strategy and risk factors related to investing in its securities. The prospectus is prepared to ensure full transparency and allow investors to make an informed decision about buying shares or bonds of the company.

Its role is very easy to understand because it mainly serves as a source of information for investors. Thanks to it, you can assess the risk associated with investing in the shares of a given company. In addition, it is a tool for regulatory control and is also an instrument of trust because it is transparent and clear.

The process of entering NewConnect – simplified rules and procedure

Entering the NewConnect market usually takes from 2-3 months to even 6-9 months, depending on the degree of preparation of the company and its legal form. The entire procedure is less complicated than in the case of the Stock Exchange (GPW), which makes NewConnect more accessible to small and medium-sized enterprises.

First, you need to prepare the company for formal requirements. For example, if you have a limited liability company, you will need to transform it into a joint-stock company.

In the case of NewConnect, the so-called Authorized Advisor is important, who supports the company in completing the formalities, watches over the entire process of its registration. As in the case of the WSE, the company must be registered with the KDPW, i.e. the National Depository for Securities, after which the debut takes place, i.e. as mentioned earlier, the first quotation of shares.

IPO – Obligations of companies during the stock exchange debut and later

IPO (Initial Public Offering) is the first public offering of a company’s shares on the stock exchange, during which investors can acquire shares of that company for the first time. This process involves a number of formal and legal obligations that must be met to enable a safe and transparent debut.

Companies have their own obligations during their debut, i.e.:

– Ensure the liquidity of shares: ensure an appropriate volume of shares on the market, and additionally, actions to stabilize the share price only take place at the time of debut, because their aim is to limit large price fluctuations

– You can also organize a ceremonial debut to promote your company and attract investors.

– Cooperation with legal and financial advisors and auditors

– Announce the first day of its trading.

Companies also have their own obligations throughout the entire listing period. These include:

Publication of current and periodic reports. Current reports concern important events such as changes in the management board, mergers, acquisitions, changes in the shareholder structure, or extraordinary situations that may affect the share price. Periodic reports are published according to a schedule (e.g. quarterly) and present financial results and reports on activities.

Protect confidential information. This is due to the MAR regulation (Market Abuse Regulation). Every significant event in the company (e.g. signing of a large contract) must be disclosed in the form of a current report.

– Ensure compliance with WSE and KNF regulations

– Maintain investor relations

– Organize a general meeting of shareholders at least once a year.

Benefits and risks of being listed on the stock exchange

Benefits of being listed on the stock exchange

A company entering the stock exchange benefits from various advantages. First of all, it is capital for development through the issue of shares. The newly acquired funds can be used for investments, research, or development and expansion into new markets. A public issue of shares increases its price compared to a non-public issue. In addition:

The prestige and credibility of such a company increases among investors, contractors, potential clients and financial institutions. Current reports, despite being mandatory, increase the transparency of the company.

The stock exchange enables the current valuation of a company’s shares, which allows for a precise determination of its market value. This valuation is useful in negotiations with strategic investors or potential buyers of the company.

A stock market debut increases the company’s recognition, as information about it begins to appear in the media and stock market reports. It is worth remembering that media recognition is very important in terms of promoting your services.

The last benefit is also the motivation of employees and the entire management team due to the fact that the shares themselves can be offered as a salary. Such motivational programs increase employee loyalty, bind them to the company for a longer time and motivate them to achieve better financial results. Stock programs are especially popular in technological and innovative companies.

Risks related to the presence on the stock exchange

When entering the stock exchange, a company must also remember about the risks associated with it.

First of all, these are:

– High costs of entry and maintenance on the stock exchange

– Listing a company on the stock exchange involves incurring significant costs, including administrative fees, advisory fees, offer promotion costs and legal fees

– Obligation to publish information about the company

– Entering the stock exchange requires publishing key information about the company’s operations, its financial results, development plans and risks related to its operations. In addition, there are the previously described reports through which the company may be exposed to the disclosure of confidential information.

In addition, it is worth remembering that someone can buy a company through investors, and the company can also be manipulated by the interests of investors. Of course, the volatility of the share price and sensitivity to the financial market are natural, which must be closely watched by specialists.

Risk of exclusion from stock exchange trading

Delisting a company from stock exchange trading is a process in which the company’s shares are no longer listed on the stock exchange. It may be the result of a decision by supervisory authorities (e.g. the Polish Financial Supervision Authority) or the effect of the company’s own actions. Delisting has significant consequences for investors and the company itself.

The reasons for exclusion vary and include, for example, breach of reporting obligations, violation of the rules of the WSE or the Polish Financial Supervision Authority, as well as acting to the detriment of shareholders.

The result may be a loss of share liquidity, a decline in liquidity, limited access to capital, or a loss of prestige and credibility, which may ultimately lead to the risk of the company being taken over.

Summary

The Warsaw Stock Exchange (WSE) and NewConnect are two key capital markets in Poland, enabling companies to raise capital and investors to access a variety of financial instruments. WSE, as a regulated market, is intended primarily for large, stable companies, while NewConnect offers simplified procedures and lower requirements, making it attractive to young, innovative companies.

The process of introducing a company to both markets differs in formal and procedural terms. The WSE requires the preparation of an issue prospectus approved by the Polish Financial Supervision Authority (KNF), while an information document is sufficient for NewConnect . Companies listed on both markets must comply with corporate governance rules and regularly publish financial and current reports.

Being listed on the stock exchange brings companies numerous benefits, such as access to capital, increased prestige and greater recognition. At the same time, companies must face risks, such as the obligation to disclose confidential information, fluctuations in the share price or the risk of a hostile takeover. Delisting a company from the stock exchange is one of the most serious threats, because it is associated with the loss of liquidity of shares and a decrease in their value.

In summary, WSE and NewConnect offer companies unique opportunities for development and capital acquisition. The choice of market depends on the specifics of the company’s business, its size and financial strategy. Both markets play a key role in the development of the Polish capital market, supporting companies and enabling investors to invest in various projects with varying levels of risk.

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