SEC revives plan to double minimum float requirement on listed firms

The Securities and Exchange Commission is reviving a plan to increase the minimum public ownership requirement for all listed companies.

SEC Commissioner Ephyro Luis B. Amatong said they were holding talks with listed firms and industry organizations on the acceptable timing to increase the minimum float to 20 percent from the existing 10 percent.

The SEC last year put the plan on hold as the benchmark Philippine Stock Exchange index fell below the 7,000 level—well into bear market territory. The SEC, instead, imposed the rule only on new listings.

The PSEi recovered toward the end of the year, paring losses to about 12 percent. Amatong said market conditions had improved since, with the PSEi now hovering around the 7,900 level.

“To ask the listed companies to issue follow on offerings last year to meet the 20 percent requirement at a valuation that might be less than their true value would not be fair to them and the investing public,” Amatong said.

He declined to comment on whether current conditions were more conducive for an overhaul of the public ownership rules.

“We are looking at it. But rather than having a short-term view, we are thinking of providing more time,” he said. He declined to say when the 20-percent public ownership requirement will be implemented.

Requiring companies to widen their ownership to the broader public is expected to increase activity in the stock market. Apart from more liquidity, the SEC believes a more diverse ownership base will reduce instances of stock manipulation.

It noted that the Philippines lags behind its neighbors in the region, which has an average minimum float of 25 percent. The SEC said investors that own more than 10 percent of issued and outstanding shares were not considered in the free float of a company.

Under the SEC’s initial guidelines, firms whose public ownership falls below the minimum will have 12 months to remedy the deficiency. Failure to do so will expose these companies to penalties, including revocation of their registration.