Companies debuting on the Philippine Stock Exchange (PSE) are now required to sell to the public 20 percent to 33 percent of their total shares, depending on market capitalization, as regulators strive to boost local market liquidity and attract quality investors.
The increase in public ownership from the previous minimum requirement of only 10 percent was mandated by the Securities and Exchange Commission (SEC), which pushed for this reform to expand and disperse the shareholder base of listed companies in order to curb opportunities for collusive market action or price manipulation and encourage good governance.
Effective immediately, a three-tiered minimum public ownership requirement will apply to companies applying for initial public offering (IPO), the PSE said in a memorandum. Under this, the public ownership requirement will decrease the larger the market capitalization of the company is.
For companies with market capitalization of over P1 billion, the required public ownership is at least 20 percent of total shares or P250 million worth of shares, whichever is higher.
For those with market capitalization over P500 million to P1 billion, the minimum public ownership should be 25 percent or P100 million worth of shares, whichever is higher.
A minimum of 33 percent public ownership or P50 million, whichever is higher, will be required for companies with market capitalization below P500 million.
A minimum of 20 percent public ownership will be required for companies applying for backdoor-listing and listing by introduction, or without any public offering, on the bourse.
The public ownership level of at least 20 percent must be maintained at all times after initial listing. The new requirements will not apply to the roster of companies already listed on the PSE prior to the issuance of the new guidelines.
The SEC believes that expanding public ownership of listed companies will increase market depth, improve market efficiency, reduce volatility and lead to better price discovery. The smaller the float of a listed company, the easier it is to find jockeys who can influence pricing artificially.
“A higher public ownership increases the free float market capitalization which enhances the Philippines’ relative weight in globally-tracked free float-adjusted market capitalization-weighted indices and in turn helps attract more capital,” the PSE and SEC said in the guidelines. INQ