The Philippine Stock Exchange (PSE) has issued new rules to entice more companies to go public, and in consideration of the extraordinary impact on businesses of the coronavirus pandemic, some requirements were relaxed for those that will brave the market this year and next year.
PSE president Ramon Monzon issued the new initial public offering (IPO) rules, as earlier approved by the Securities and Exchange Commission, in a memorandum dated March 24, effective immediately.
In approving applications filed in 2021 and 2022 for listing on the main and the small, medium and emerging board, the PSE, on a case-to-case basis, may consider the profitability of the applicants for any two fiscal years in the three most recent fiscal years, excluding the year of the pandemic impact, Monzon said.
“To illustrate, for an IPO application filed in 2021 by a company demonstrating the negative impact in its financial condition and results of operations for 2020 due to COVID-19, the two most recent fiscal years shall be 2018 and 2019. If the application is filed in 2022 and the year of the impact is 2020, the two most recent fiscal years shall be 2019 and 2021,” Monzon said.
But the IPO applicant must fully disclose in the prospectus the adverse impact of the pandemic on its operations, expected duration of the pandemic’s effects on business, recovery measures, and business prospects of the applicant in the next five years, among others.
Based on the guidelines, a company applying to list on the main board must have a cumulative net income, excluding non-recurring items, of at least P75 million for three full fiscal years immediately preceding the application for listing and a minimum net income of P50 million for the most recent fiscal year. The company must have been in the same businesses – and must have a proven track record of management – throughout the last three years prior to the filing of the application.
The previous requirement was a minimum market capitalization of P500 million.
Exempted from the new income requirement are companies which have been operating for at least 10 years prior to the application and have a cumulative net income of at least P75 million for at least two of the three immediately preceding fiscal years.
Also exempted are newly formed holding companies which use the operational track record of their subsidiaries, subject to certain restrictions. However, a newly formed holding company which invokes the operational track record of its subsidiary is prohibited from divesting its shareholdings in such subsidiary for a period of three years from the listing of its shares, unless such a divestment plan is approved by the majority of stockholders.
Companies that are exempt from the track record and operating history requirements – such as mining, petroleum and renewable energy companies and newly formed holding companies – are prohibited from offering secondary shares during the IPO.
A newly-listed company is likewise prohibited from offering additional shares, except offerings for stock dividend and employee stock option plan within 180 calendar days from date of original listing.
A listed company that incurs negative stockholders’ equity for three consecutive years will be subject to delisting within 30 days from approval by the PSE’s board.