By Revin Mikhael D. Ochave, Reporter
THE RECENTLY ANNOUNCED action of the Philippine Stock Exchange (PSE) to lessen the minimum public ownership (MPO) for substantial initial public offerings (IPOs) could have adverse effects on investor trust as it presents an “unequal playing field,” according to stock market analysts.
“It’s not favorable optics for the PSE, considering they have been quite proactive in penalizing firms that do not meet public float standards, and this might be seen as the regulator bending the rules a bit to cater to major corporate interests,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia expressed in a Viber message.
Unicapital Securities, Inc. Research Head Wendy B. Estacio-Cruz mentioned in a Viber message that the decrease in MPO fosters an uneven playing field.
“If exemptions become commonplace, it may cultivate an uneven playing field where larger enterprises receive more leniency than smaller ones, potentially hindering fair competition,” she remarked.
PSE President and Chief Executive Officer Ramon S. Monzon stated last week that the market operator has obtained the endorsement from the Securities and Exchange Commission (SEC) to reduce the public float stipulation to encourage undecided companies to move forward with their listing intentions.
Companies planning IPOs can initially comply with a 15% public float, provided they commit to increasing the public float to 20% within a two-year timeframe.
Mr. Monzon has indicated that this measure is not permanent and will be reassessed in the forthcoming years.
“We have a two-year interval, and if that doesn’t yield results, we will extend it for an additional two years,” he added.
The PSE’s initiative coincides with GCash, managed by Globe Fintech Innovations (Mynt), preparing to go public later this year.
Bloomberg reported Globe Telecom, Inc. President and Chief Executive Officer and Mynt Chairman Ernest Cu as stating that the GCash IPO will partly hinge on regulators consenting to lower the public float to 10-15% for larger offerings.
Nevertheless, Mr. Garcia expressed that easing the public float requirement for IPOs contradicts ongoing initiatives to enhance corporate governance standards in the nation.
“A reduced percentage of public ownership implies that the public constitutes a smaller minority that can be easily overruled or disregarded when inducing corporate resolutions,” he noted.
“This also carries long-term consequences regarding the appeal of the Philippine market to investors. The requirement to elevate the public ownership threshold to 20% could also create an overhang for those participating in the IPO, due to the inevitable dilution of their stake over the next two years,” he added.
Ms. Estacio-Cruz remarked that a prolonged diminished public float may also “result in lower stock liquidity and increased price fluctuations, rendering the market less appealing for retail investors.”
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort indicated in a Viber message that the lowered public float for IPO-targeted companies should merely be a temporary relief.
“This could represent a transient regulatory breather amid market volatility that has somewhat diminished market interest. It could be reinstated after a period, especially once market conditions become favorable, as these are all elements of market reforms,” Mr. Ricafort articulated.
“Nonetheless, there needs to be a careful balance to incentivize more companies to list shares in a challenging market atmosphere,” he added.
Conversely, China Bank Capital Corp. Managing Director Juan Paolo E. Colet mentioned in a Viber message that the recent action by the PSE will aid in persuading certain companies struggling to meet the 20% MPO.
“Ideally, we would prefer listed companies to uphold a high public float to allow more investors to engage in wealth generation, encourage superior corporate governance standards, and boost market liquidity,” he stated.
“Public float and liquidity hold particular importance for foreign investors and are critical standards for inclusion in global and regional equity indices. Therefore, to attract more foreign capital inflows into our stock market, it logically follows to encourage measures and cultivate conditions that enhance public ownership and trading levels,” he emphasized.
The local exchange has not yet witnessed an IPO this year. However, some anticipated public listings comprise GCash, the Pangilinan-led water concessionaire Maynilad Water Services, Inc., and Cebu-based fuel retailer Top Line Business Development Corp.
The PSE anticipates six IPOs this year.
