PSE seeks SEC nod for companies to list preferred shares sans IPO

Insider Spotlight

• The Philippine Stock Exchange is proposing to allow companies to directly list preferred shares without first conducting an initial public offering
• The exchange also wants to reduce the minimum preferred share offering size to P100 million from P1 billion to broaden access for smaller issuers
• Proposed changes include streamlined disclosure rules focused on dividend-paying capacity and a revised penalty framework for preferred share issuers

The Philippine Stock Exchange (PSE) has asked the Securities and Exchange Commission (SEC) to approve sweeping amendments to its listing rules that would introduce direct listings for preferred shares and lower the barriers for companies seeking to raise capital through the equity market.

In a June 25 letter submitted to the SEC, the exchange proposed revising Article III, Part H of the PSE Consolidated Listing and Disclosure Rules to permit companies to list preferred shares without first conducting an initial public offering (IPO). 

Under the proposal, listed preferred shares would become immediately tradable upon listing.

Why it matters

The proposal is designed to give issuers greater flexibility in accessing capital markets while expanding financing options, particularly for companies that may not require a traditional IPO. 

The framework would also require issuers that choose direct listing to distribute at least P50 million worth of the same class of preferred shares to a minimum of 100 investors within one year after listing.

Preferred shares are a class of equity securities that give investors priority over common shareholders in receiving dividends and, if a company is liquidated, in claiming assets after creditors have been paid. 

Unlike common shares, preferred shares generally do not carry voting rights, but they typically pay fixed or predetermined dividends, making them attractive to income-focused investors.

They combine features of both stocks and bonds, offering more stable returns than common shares while allowing companies to raise capital without increasing debt.

Ramon Monzon

The PSE chief wants unlisted firms to be able to list preferred shares directly without going through an IPO.

The exchange is likewise seeking to cut the minimum public offering requirement for preferred shares to P100 million from P1 billion. 

According to the PSE, the lower threshold would help democratize access to the stock market and allow small and medium-sized enterprises with smaller funding requirements to qualify for listing. It also proposes reducing the minimum number of stockholders upon listing to 100 from 1,000 to align with the smaller offering size.  

The details

The proposed amendments would eliminate the minimum public ownership requirement for preferred shares, arguing that issuers already raise funds from public investors through these securities. 

The exchange also removed an earlier proposal requiring valuation reports and fairness opinions for direct listings, opting instead for pricing based on prevailing market yields, comparable issuances, issuer credit profile and dividend terms, supported by a report from the issuer’s financial advisor.

The PSE also plans to streamline disclosure obligations by focusing on matters affecting an issuer’s ability to pay dividends, reducing the number of events requiring immediate disclosure from 42 to 28. 

At the same time, it proposed a modified penalty framework tailored to preferred share issuers while retaining structured disclosure fines and strengthening sanctions for violations affecting dividend payments, redemption rights and other shareholder protections.

What’s next

The exchange said it conducted public consultations in April and June 2026, incorporating feedback from market participants including investment banks, fund managers and corporate issuers before submitting the revised proposal to the SEC for approval. — Daxim L. Lucas | Ed: Corrie S. Narisma