Small investors’ IPO share allotments increased

The Philippine Stock Exchange has fine-tuned its listing rules to make initial public offerings (IPOs) more accessible to local small investors (LSI), giving them greater opportunity to benefit from potential market gains.

In a memorandum posted on Thursday, the PSE said the Securities and Exchange Commission had approved the amendments to Article III, Part F, Section 3 of the PSE’s consolidated listing and disclosure rules.

Among the approved amendments—which the PSE implemented immediately—is the increase in the maximum IPO allotment for LSI to P100,000 to make equities investing more worthwhile for retail investors.  The previous cap was a meager P25,000.

The amendment now defined an LSI as a “share subscriber who is willing to subscribe to a minimum board lot and whose subscription does not exceed P100,000.”

In the event of an over- or under-subscription to the 10 percent allotment, a “clawback” or “clawforward” mechanism will be implemented.

A clawback mechanism increases the shares allotment to the retail segment in case of overwhelming demand while a clawforward reallocates more shares to institutional investors from the original amount set aside for retail investors.

The amended rules also required the removal of the 10-percent discount that LSIs are given vis-a-vis IPO price, thus leveling the playing field for all investors.

The new rules also now require the IPO issuer to provide an appropriate distribution mechanism to facilitate greater LSI participation nationwide.

Finally, the issuer is required to prioritize LSIs with subscriptions lower than P100,000 in the allocation.

To date, less than 1 percent of Filipinos engage in equities investing. Last year, total stock market accounts stood at 868,810, up by 12.4 percent from the level in 2016. Online stock trading accounts grew by 28.5 percent last year to 388,864, equivalent to about 45 percent of total trading accounts at the local bourse. The share was 39 percent in the previous year.