By Revin Mikhael D. Ochave, Reporter
THE Securities and Exchange Commission (SEC) is considering a tiered method for the minimum public float stipulation for firms seeking to list on the stock exchange, according to its chairperson.
SEC Chairperson Francisco Ed. Lim mentioned that the existing 20% minimum public float criterion for companies intending to conduct an initial public offering (IPO) represents a “one-size-fits-all” scenario that could benefit from a tiered framework based on the company’s market capitalization.
“A 20% float at IPO, regardless of the size of the offering, was implemented to enhance market liquidity, which is one of the fundamental issues. However, I believe the 20% (float) is a ‘one size fits all.’ Personally, I don’t view that as the optimal approach,” Mr. Lim remarked in an interview set to be broadcast on One News’ Thought Leaders with Cathy Yang on July 25.
Mr. Lim stated he instructed the overseeing SEC commissioner to examine tiers contingent on the firm’s market capitalization.
“The greater the market capitalization, the smaller the percentage of free float,” he noted.
Mr. Lim indicated that the SEC will have internal discussions on the proposal but will also seek opinions from the Philippine Stock Exchange (PSE) and the public.
“I believe this has been adopted by other exchanges. Let’s observe the outcome,” he stated.
Mr. Lim asserted he is not in favor of granting exemptive relief from the current 20% public float requirement.
“I’m quite averse to exemptive relief,” he added.
Mr. Lim explained that the tiered approach ensures the rule is applicable to all firms, in contrast to exemptive relief, which is allocated on a case-by-case basis.
“Just modify the rule to make it applicable to everyone rather than favoring a specific company, because once you do that, other companies will present their own reasons for why they should be granted exemptive relief,” he said.
In March, the SEC, then led by chairperson Emilio B. Aquino, announced that companies may apply for exemptive relief from the 20% public float regulation “provided they bridge any gap from the 20% standard within less than 24 months from the listing date and only as considered necessary by the commission.”
The SEC initially permitted a minimum public float of 15% through exemptive relief, though subject to stringent criteria.
Nonetheless, the regulatory body “remained steadfast” on the 20% minimum public float requirement for firms looking to undertake an IPO, emphasizing the “importance of higher public ownership to market depth and efficiency.”
The SEC’s initiative came as Globe Telecom, Inc. stated that the long-anticipated IPO of GCash, overseen by Globe Fintech Innovations (Mynt), will hinge on regulators reducing the mandated public float to 10%-15%.
In 2017, the commission raised the minimum public ownership criterion for companies aiming to conduct an IPO to 20% from the earlier 10%.
AP Securities, Inc. Research Head Alfred Benjamin R. Garcia conveyed in a Viber message that the tiered system would benefit companies aspiring to go public.
“That would be a more effective approach than exemptive relief, as the latter appears too much like favoritism. It also makes logical sense as it translates the percentage into peso amounts, thus keeping the end result aligned with the objective of ensuring liquidity,” he remarked.
“At least Mr. Lim seems to prioritize actual shareholder welfare over adjusting the rules to accommodate specific companies,” he added.
Unicapital Securities, Inc. Research Head Wendy B. Estacio-Cruz stated in a Viber message that the tiered strategy provides a “more pragmatic and inclusive avenue to promote IPOs.”
“It presents a clearer and more foreseeable pathway for companies that might struggle to meet the 20% threshold immediately. Simultaneously, it supports the goal of enhancing market liquidity without being excessively rigid,” she noted.
“This strategy also helps eliminate the impression that regulations are being adjusted for select companies, which can occur when exemptions are granted too frequently. Overall, it presents a fairer and more transparent method to find a balance between attracting listings and cultivating a robust, liquid market,” she concluded.
The PSE aims for six IPOs this year. However, only one company has launched its stock market introduction — Cebu-based fuel retailer and distributor Top Line Business Development Corp. in April.
Besides GCash, other firms anticipated to go public include Maynilad Water Services, Inc. and integrated resort operator Hann Holdings, Inc.
On Tuesday, the benchmark PSE index increased by 0.04% or 2.95 points to 6,355.69, while the broader all shares index rose by 0.1% or 3.76 points to 3,757.20.
Mr. Lim’s interview on Thought Leaders with Cathy Yang will be broadcast at 9:30 p.m. on July 25 on One News Channel.
