This comes after current PSE president and CEO Ramon Monzon secured the approval of the Securities and Exchange Commission to lower the minimum float from 20 percent to 15 percent for IPOs worth P5 billion or more.
“It’s an excellent strategic move to incentivize more IPOs without sacrificing stock market liquidity in the long term,” Lim, who was president of the PSE from 2004 to 2010, told InsiderPH in a text message.
Investor protection vs. market growth
The float refers to the portion of shares sold to public investors. Under the scheme, companies are required to meet the 20 percent minimum within two to three years.
One of the potential first IPOs to tap the new rule is GCash, although the firm has yet to provide specific details for its highly anticipated offering.
The new IPO float scheme, first reported by InsiderPH last January, is reigniting debate over the balance between investor protection and market growth. For example, a smaller public float can make a stock more prone to price manipulation and illiquidity.
But Monzon cautioned against being too dogmatic about rules, as he seeks avenues to encourage listings amid a tepid market environment, mainly driven by external factors.
Is the PSE being too lenient with its float rules compared to regional peers?
Not exactly. Based on a report by the Organisation for Economic Co-operation and Development, which released a capital market review of the Philippines showing the country’s float requirements are broadly in line with those in the region.
Previously, the PSE required a float of 20 percent for most listings (going up to 33 percent for real estate investment trusts).
This is similar to Thailand’s 20–25 percent, Indonesia’s 10–20 percent, and Vietnam’s 10–15 percent, while peers like Malaysia and Singapore require 25 percent.
The PSE keeps the same requirements for smaller listings on its SME board, but other jurisdictions offer more flexibility.
For instance, Singapore allows a 15 percent float for listings in its “Catalist” category while Vietnam and Indonesia allow a public ownership level as low as 10 percent.
The OECD report, released last December, concluded that the PSE could encourage more listings by lowering fees and easing the profitability requirement, as Indonesia, Malaysia, and Singapore have done.
“While listing requirements are critical to maintaining market integrity and fostering investor confidence, it is equally important that they are structured in a balanced manner that does not discourage companies from entering the public equity market. One such requirement is profitability,” it said.
Other recommendations from the OECD:
• Committing to a three-month IPO approval process and potentially implementing a single submission platform for IPO applications
• Simplifying the listing fee structure and introducing a maximum threshold on the initial listing fee
• Lowering the stamp duty tax rate to increase the attractiveness of the Philippine equity market
• Applying proportional requirements for the SME Board to make equity financing more accessible to SMEs
• Implementing a simplified prospectus for issuances below a certain size for companies seeking to list on the SME Board of the PSE
Deal-maker: Deeper reforms needed
“The new rule granting public float flexibility for large IPOs may factor into the decision-making of certain IPO candidates, particularly companies who find it challenging to meet the 20 percent threshold. Perhaps this will finally persuade GCash to list on the PSE this year,” Juan Paolo Colet, managing director at China Bank Capital, said in a text message.
“However, it’s important to keep in mind that the public float requirement is not the only consideration of companies that want to do an IPO. They also look at investor sentiment, market liquidity, listing costs, and regulatory obligations, which are in turn tied to other factors. So there is still a lot more that can be done to reinvigorate our stock market,” he added.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
