PSE may allow preferred shares – only IPO

MANILA, Philippines – The Philippine Stock Exchange (PSE) plans to allow companies to debut on its bourse by offering preferred shares without having to list their common shares.

The issuer, however, must offer at least P5 billion worth of preferred shares, based on a draft regulation exposed by the PSE for public feedback.

In lieu of the rule requiring listed companies to maintain a public ownership of at least 20 percent of its issued and outstanding shares, the issuer must have at least 1,000 public stockholders, each owning stocks equivalent to at least one board lot after the offering, the draft regulation dated March 10 said.

“There are companies which are already operating but prefer not to offer common shares until their full income earning potential is realized. Thus, PSE would like to offer these companies the option to tap the stock market for funding via the issuance of preferred shares, without the listing of their common shares,” PSE president Ramon Monzon said.

Monzon said the proposed framework – which is still subject to market feedback and approval from the Securities and Exchange Commission – would give issuers flexibility to structure a fundraising structure that is best suited to their business operations and strategies while providing the investing public the opportunity to participate in the economic benefits as shareholders.

The holders of preferred shares can also exercise voting rights with respect to the fundamental corporate actions specified in the Revised Corporation Code, Monzon said.

Preferred shares are considered as equity but they also have the characteristics of bonds. Its holders have a higher claim on distribution of dividends than common stockholders. In the event of a liquidation, preferred stockholders’ claim on assets is greater than common stockholders but less than bondholders.

The proposed rule was benchmarked against the rules of other exchanges such as the Singapore Exchange, Australia Stock Exchange, New York Stock Exchange, and Taiwan Stock Exchange which all allow listing of preferred shares only, Monzon noted.

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