The main motivation was, of course, a new source of funding. Mr. Palát quickly calculated what this could mean to his company specializing in military and work footwear, and he realized that he could reduce its dependence on its bank. “The original plan was to raise additional capital to grow the business. However, my partner Juraj Vozár is extremely conservative and well-versed in finance, so we agreed that I would sell a part of my share and return two-thirds of it to the company as a low-interest subordinated debt,” he explains.
In the primary issue, he thus offered 15 per cent of his shares. The gross revenue was around CZK 60 million, and the company reduced its bank financing by two-thirds. “We freed our hands, even if it means that I will get lower dividends in the future. I don’t mind because the pros compensate for it,” says Palát. The costs of the entire operation ranged up to five per cent of the revenue and were mainly related to the preparation of the issue, its promotion, and the compilation of prospectuses.
There was a risk that I would incur expenses for a potentially unsuccessful listing, but I was optimistic.
On the other hand, he was soon aware that, in terms of PR and brand awareness, the primary issue would be a priceless advertisement. “At one time you opened a newspaper, and Prabos was there. Such a campaign would cost us tens of millions. In addition, it was a spontaneous promotion: media mentions,” he recalls.
In addition to capital funding, the company gained a reputation benefit. “Of course, it helps when I can say, here is Prabos, a company listed on the stock exchange, people look at us differently, “says the businessman. His reputation has soared as well because he is now a person who brought his company onto the stock exchange. “For years, I did business the way I wanted, and I basically didn’t care if anyone knew me or what people thought of me. However, as I get older, I care more about what I will one day leave behind,” adds Palát with a smile.
Financial freedom above all else
In his words, the process of entering the stock market itself went as expected. The only small disappointment came from the first subscription round, when, despite general assurances about the expected success, just about a third of the offered 15% share found interested buyers. “However, when I looked at it without emotions back, I thought, so many people have trusted us. Even if nothing else comes, it is great,” says Jaroslav Palát.
The remaining shares were eventually sold within the next three or four months. Ever since, their price has never fallen below the subscription price of CZK 400; the current average is about 406 crowns. At same time, Prabos also promises a dividend payment.
The co-owner of the company was so satisfied last year that he decided to offer another ten per cent of the shares on the stock exchange, thus reducing his share to only a quarter. “It’s a little more complicated now, but I’m not afraid that we wouldn’t be able to sell the additional ten per cent,” says Palát. The main goal is to get rid of other bank loans. According to him, in the current fat years, banks compete to offer funding, but lean years will come, and bankers will be the first to back out. “The less dependent I am on the bank, the freer I am, and I can also take risks. And I value freedom above all else, and that includes financial freedom,” says the co-owner of Prabos.