More companies are expected to tap the equity markets to raise funds for their much-needed post-pandemic recovery strategy as loans could be more expensive given the upswing in interest rates, the Philippine Stock Exchange (PSE) said.
So far, PSE has had eight initial public offerings (IPO) this 2022 and at least three more are slated before the year ends.
“We see companies requiring capital to fund their post-pandemic recovery plans. At this time of high interest rate regime, selling shares to the public is a more viable option than taking out loans,” PSE president and CEO Ramon Monzon said in a statement.
Last month, the Bangko Sentral ng Pilipinas hiked its key policy rate by 50 basis points to 3.75 percent. Interest rates on the overnight deposit and lending facilities were also raised to 3.25 percent and 4.25 percent, respectively.
Apart from this, Monzon said that easing the listing rules and repealing the IPO tax under Republic Act 11494 also known as the Bayanihan to Recover as One Act or Bayanihan II also supported more IPO launches.
For example, the PSE removed the P500-million minimum market capitalization requirement for companies listing on the main board.
Those eyeing to list on the small, medium and emerging (SME) board also do not need to have positive earnings before interest, taxes, depreciation and amortization in at least two of the three fiscal years before filing the application. As such, a sponsor can vouch for the company instead.
SME board
Under this model, an eligible sponsor can endorse the IPO application if it deemed the company suitable for listing after reviewing its financial condition, business viability, future prospects and management track record, among others.
“There are several companies that do not qualify to list based solely on the SME Board listing requirements. We want the stock market to be accessible to these businesses and give them equal opportunity to raise capital through equity financing, especially if they are profitable and have rosy growth prospects,” Monzon said.
On Sept. 15, PSE is set to host “Road to IPO 2022,” a virtual session that aims to raise awareness on the value of going public to raise funds.
“Through this forum, we want to demystify the IPO process and simplify what is seemingly technical about going public with the help of speakers that have conducted their own IPOs and those who are tapped by companies to help them in their IPO journey,” Monzon said.