By Revin Mikhael D. Ochave, Reporter
THE SECURITIES and Exchange Commission (SEC) is permitting an initial public float of 15% for certain companies aiming to enter the public market, but adhering to “stringent” standards.
“After extensive discussions with the Philippine Stock Exchange (PSE), the SEC has permitted, through exemptive relief, an initial public float of 15%, contingent on strict standards,” the regulatory body stated in an announcement on Thursday.
Nevertheless, the SEC asserted it “remained steadfast” on the 20% minimum public float condition for firms intending to conduct an initial public offering (IPO), “particularly considering the importance of increased public ownership for market depth and efficiency.”
According to its Memorandum Circular No. 13 issued in 2017, the SEC elevated the minimum public ownership (MPO) standard for IPO-targeted companies to 20% from the prior 10%.
The SEC indicated that firms can seek exemptive relief from this regulation “if they can fill any gap from the 20% target within less than 24 months from the listing date and only as determined necessary by the commission.”
“This applies to listing applications that have already been submitted and accepted by the SEC and the PSE,” it noted.
As of March 25, there have been no applications for regulatory relief from prospective IPO candidates with the SEC and PSE.
The SEC released this statement following comments from PSE President and Chief Executive Officer (CEO) Ramon S. Monzon last week, stating that the regulator was amenable to lowering the public float requirement to stimulate more IPOs.
Reducing the public float requirement could facilitate the long-anticipated IPO of GCash, managed by Globe Fintech Innovations (Mynt).
Prior news reports cited Globe Telecom, Inc. President and CEO and Mynt Chairman Ernest Cu, mentioning that the GCash IPO’s progress will partly rely on regulators allowing the public float to be lowered to 10-15% for larger offerings.
On Thursday, the SEC emphasized that the 20% MPO requirement for IPO-bound companies “is essential for enhancing price discovery and diminishing risks for price manipulation.”
“The float requirement also aims to lessen ownership concentration and promote sound corporate governance, ultimately contributing to a healthy capital market,” it added.
The SEC reiterated its commitment to maintaining the capital market “equitable, transparent, and efficient.”
“While the commission welcomes new listings, it maintains rigorous regulatory standards that protect the integrity and long-term stability of both the Philippine capital market and the broader economy,” it stated.
In response to requests for expert insight, AP Securities, Inc. Research Head Alfred Benjamin R. Garcia expressed that this new regulation would incentivize larger firms to proceed with their IPO strategies.
“We believe this new regulation would motivate larger companies to go public, especially if they have delayed their offerings due to market circumstances,” he stated in a Viber message.
“If you notice, we have primarily witnessed smaller IPOs in recent times because the market hasn’t been liquid enough to accommodate significant offerings,” he added.
Conversely, COL Financial Group, Inc. Chief Equity Strategist April Lynn C. Lee-Tan commented via Viber that this action may have adverse effects for companies planning their IPOs.
“Raising the float to 20% in a maximum of two years might be unfavorably perceived by companies due to the risk that market conditions could remain weak and the share price might fall below the IPO price by then,” she remarked.
“However, if fewer shares need to be sold, there’s a greater possibility of selling your stocks at a higher valuation for companies intending to launch an IPO,” she added.
Unicapital Securities, Inc. Research Head Wendy B. Estacio-Cruz stated that the SEC’s confirmation of its commitment to the 20% MPO would motivate firms to adhere to the rule.
“Yet from my perspective, the SEC is also open to granting relief to facilitate large companies moving forward with their proposed IPOs, contingent upon assessment and compliance with the set criteria,” she stated in a Viber message.
The PSE anticipates six IPOs this year. However, no public listing has taken place yet this year.
Numerous companies are projected to initiate their IPOs this year, including water concessionaire Maynilad Water Services, Inc. and Cebu-based fuel retailer Top Line Business Development Corp.
