IPOs and spinoffs — the Warsaw Stock Exchange and the US

Lesson 4: IPOs and spinoffs — the Warsaw Stock Exchange and the US

An IPO or a spinoff is the moment when the narrative is loudest and the public-company record shortest. Information risk is elevated, volatility is at its highest, and lock-ups, stabilisation and oversubscribed institutional demand create mechanics that mature companies lack. This lesson teaches you to measure that mechanics rather than guess the direction.

Lesson goal

You will understand the IPO and spinoff process on the Warsaw Stock Exchange (GPW) and in the US, learn to read a prospectus, assess dilution, lock-up, use of proceeds and the new entity’s balance-sheet risks, and build a plan with no-trade windows.

1. IPO — the initial public offering

An IPO is the sale of shares to existing or new shareholders to list on an exchange or raise capital.

The IPO process:

1. Prospectus / S-1 (US) — business model, risks, financials, use of proceeds, lock-up, debt covenants
2. Book building — gathering institutional demand, price range
3. Price setting, allocation
4. Debut, stabilisation option (greenshoe) — up to 15% more shares
5. Lock-up: 90-180 days (US), 90-360 days (GPW) for insiders and pre-IPO funds

What you measure in the prospectus (a 10-point checklist):

1. Use of proceeds — does 70%+ go to growth/capex or to debt repayment and payouts to the funds?
2. Organic revenue growth versus acquisitions financed with debt before the IPO.
3. Margins — window dressing before the IPO (cutting costs)?
4. Net debt pro-forma after the IPO — is the company still heavily indebted?
5. Customer/supplier concentration (>20% of revenue — a risk).
6. Related-party transactions (RPT).
7. Lock-up: who, how much, when it ends — put it in the calendar.
8. Dilution: how many options/RSUs are outside the market and when they vest.
9. Dual-class shares — does the founder have 10x the votes (common in US tech)?
10. Valuation versus the peer group — EV/Sales, EV/EBITDA on a pro-forma basis, not on the old balance sheet.

Table of differences, GPW versus the US:

2. Spinoff, carve-out, split-off

A spinoff is the separation of part of a business into a separate public company.

Why are spinoffs interesting in stock picking? The market often misprices a conglomerate. The separated company has a cleaner balance sheet, a dedicated management board and its own capital-allocation policy. But it also has its own debt (often allocated from the parent) and stand-alone costs.

Measuring a spinoff:

Net debt pro-forma of the new company = Debt allocated + Leases - Cash allocated
EBITDA pro-forma stand-alone = Historical EBITDA of the segment - parent corporate costs + estimated stand-alone costs
Initial EV = Market cap after the debut + net debt pro-forma
Compare: EV/EBITDA of the new company versus EV/EBITDA of pure comparable companies

The trap: the parent company “tidies up” the balance sheet before the spinoff — it shifts debt onto the subsidiary. Check the “transactions with parent” note and the debt allocation agreement.

3. IPO valuation — how to avoid the prospectus anchor

The investment bank shows a valuation on multiples and a DCF with an optimistic scenario. Your job is normalisation.

Method:

1. Recalculate the fully diluted market cap (with RSUs, with options).
2. Calculate the EV pro-forma (with the IPO cash, with the debt repayment).
3. Compare EV/Sales and EV/EBITDA with the sector median for the US/GPW on a forward 12M basis, not TTM.
4. Calculate the path to profitability: burn rate = CFO - CAPEX; how many quarters of cash will that cover?
5. Build a dilution table:

Number of shares pre-IPO = X
New IPO shares = Y
Unvested options/RSUs = Z
Fully diluted = X+Y+Z
Your % at price Z = Y / Fully diluted

4. Trading mechanics around an IPO and a spinoff

IPO seasonality: in the US most IPOs happen in Q2 and Q4, which correlates with fund window dressing. On the GPW, IPOs depend on the condition of the WIG index and on sentiment in foreign markets.

When the plan says “do not trade”

• You do not trade on debut day without a defined maximum slippage and a loss limit on an opening gap of >15%.
• You do not trade a company for the first 5 sessions after the IPO with a position larger than 0.5% of the portfolio — there is no ATR data and no measurable risk.
• You do not trade 3 days before and 2 days after the end of the lock-up if the lock-up is >25% of the free float — supply risk outside your model.
• You do not trade a spinoff in the first week without reading Form 10 (US) or the information document (GPW) and the debt-allocation note.
• You do not trade an IPO where >60% of the offering is a sale by VC/PE funds, the use of proceeds mainly repays debt owed to those same funds, and the company still has net debt/EBITDA >4.
• You do not trade a carve-out where the free float is <15% — manipulation and liquidity risk are unmeasurable.

The mistakes that cost the most

1. Anchoring on the book-building price. The IPO price comes from a negotiation of demand, not of value. A first day at +70% does not mean the company is worth more — it means underpricing and greenshoe mechanics.
2. Ignoring hidden dilution. RSUs, warrants, SPAC earnouts — after the IPO the number of shares can rise by 15-30% in a year. Not adjusting the market cap inflates your valuation.
3. No lock-up map. The end of the lock-up is a supply event known in advance. Not marking it in the calendar means not measuring the risk.
4. Valuing a spinoff on the parent’s earnings. The segment’s margin inside the conglomerate is subsidised by shared costs. After the separation SG&A costs rise by 2-5 percentage points — you must model that.
5. Trading an IPO on leverage. Debut volatility can throw you out on the stop-loss and then come back. Leverage with no ATR history is an uncontrolled loss.

A measurable exercise

Pick 2 recent IPOs (1 on the GPW from the last 12 months, 1 in the US) and 1 US/GPW spinoff from the last 24 months.

1. Download the prospectus/S-1 and Form 10 — write down use of proceeds, net debt pro-forma, fully diluted share count and lock-up dates.
2. Calculate: EV/Sales pro-forma at the debut price and at the D+5 close, and compare with the sector median.
3. Mark in the calendar: lock-up end date, first quarterly report date, greenshoe expiry (D+30).
4. Calculate the drawdown from the D1 peak to the D30 trough — what loss would that be on a position of 1% of the portfolio without a stop?
5. Write down the rule: “In an IPO I invest/trade only if… (measurable conditions)”.

Time: 120 minutes. Output: 1 pro-forma table + 1 event calendar + a rule in the plan.

Check yourself

1. What is the difference between a primary and a secondary offering, and how does it affect net debt pro-forma?
2. What does greenshoe mean and how does it affect price stabilisation in the first 30 days?
3. Why is the end of the lock-up important for measuring supply risk?
4. What does a dual-class share structure mean and what risk does it carry for minority shareholders?
5. How will you calculate the EV of a spinoff if you do not yet know its net debt?

Frequently asked questions

Is it worth subscribing to an IPO on the GPW? Subscriptions make sense only with a measurable strategy for allocation, reductions and the opportunity cost of frozen capital. Statistically the first days are volatile — measure the average rate of return after accounting for reductions, not the maximum gap.

Does a spinoff always create value? No. Some spinoffs shed a weaker asset along with its debt. Value is created when the new company has a clean model, better allocation and management accountable for ROIC, not when it is a dumpster for debt.

Where can I find a lock-up calendar for the US? In the S-1, in the “Shares Eligible for Future Sale” section, plus Form 4 and Form 144 insider filings in EDGAR. On the GPW — the prospectus plus ESPI announcements on transactions by persons with access to inside information.

Is a SPAC the same as an IPO? A SPAC is an alternative route to listing via a merger with a blank-cheque company. The dilution mechanics (warrants, sponsor promote) are larger than in a classic IPO and require a separate fully diluted analysis.

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