68 listed companies seen raising P130B in capital
The Securities and Exchange Commission sees more than P130 billion in fresh capital-raising to be launched by 68 publicly listed companies that need to comply with higher minimum public ownership requirements sanctioned by the corporate regulator in the next three years.
In a briefing for market participants yesterday, SEC director Vicente Graciano Felizmenio Jr. said 68 publicly listed companies would be affected by the SEC’s decision to double the minimum public ownership for listed companies to 20 percent from 10 percent at present.
Starting July 1, all companies applying to list on the Philippine Stock Exchange must bring to public hands 20 percent of their shares.
Companies already listed will be given three years to comply with the 20-percent public float requirement. They will be required to increase their public float to at least 15 percent on or before the end of 2018 and then to at least 20 percent on or before the end of 2020.
By 2018, if deficient companies will choose to widen their public float to 15 percent, Felizmenio estimated that about P37.23 billion worth of fresh capital would be raised between now and this assumed that these companies would not raise their public ownership further during the year.
Of the 68 companies seen affected by the new public float requirements, 39 have public ownership below 15 percent at present.
But by 2020 when all 68 companies are required to maintain a public float of 20 percent, Felizmenio estimated that there would be P112.50 billion in fresh capital-raising requirement in the next three years.
In case companies opt to comply with the 20 percent minimum public requirement by 2018, fresh capital requirement will amount to P130.98 billion. This is as some companies may opt to widen their public float to 20 percent right away ahead of the 2020 deadline, Felizmenio said.
As to whether the domestic market can absorb the fresh capital-raising requirements of companies, Felizmenio noted that in 2016, some P51.9 billion in fresh equity was raised from initial public offerings and another P22 billion from follow-on offerings. As such, he said this would already approximate half of the capital-raising requirements to comply with the minimum public float.
Public float refers to the portion of the issued and outstanding shares that are freely available and tradable in the market and are non-strategic in nature or those not meant for the purpose of gaining substantial influence on how the company is being managed.
Based on the SEC’s definition, significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered “strategic” and thus, excluded in the public float of the company.
The SEC believes that a higher level of public float would “market depth and is essential for sustaining a continuous market for listed securities to provide liquidity which in turn attracts good quality and long-term investors.” The increase in liquidity in turn “improves market efficiency, reduces volatility and helps in better price discovery,” the SEC said.
At the same time, the corporate regulator said “a large and dispersed shareholding lowers the opportunities for collusive market action or price manipulation and encourages good governance.”
Failure to comply with the minimum public float may result in administrative sanctions. Furthermore, trading of shares of non-compliant companies is subject to higher tax rate.
Under Bureau of Internal Revenue (BIR) Revenue Regulations No. 16-2012, all publicly listed companies are required, at all times, to maintain a minimum public ownership as prescribed by the SEC to enjoy preferential tax treatment.
The trading of shares of stock of publicly listed companies that meet the minimum public ownership is subject to a preferential stock transaction tax of one-half of one percent of the gross selling price. On the other hand, the trading of shares of publicly-listed companies that fail to meet the public ownership requirement is subject to final tax of 5 percent or 10 percent on the net capital gains, and documentary stamp tax.—DORIS DUMLAO-ABADILLA
