THE Philippine Stock Exchange, Inc. (PSE) said it will have to issue about P5 billion worth of shares to bring down broker ownership, in an effort to comply with the single industry ownership limit.
“We need to raise another P5 billion of new money to be able to dilute, I think,” PSE President and Chief Executive Officer Ramon S. Monzon told reporters on the sidelines of the PSE-Securities and Exchange Commission (SEC) forum on sustainability reporting in Taguig City on Friday last week.
Mr. Monzon said the strategy now would be to dilute shareholders’ ownership in the PSE altogether, since they have not been able to convince brokers to sell their shares to the exchange.
“We’ve tried to convince many brokers to sell, but they don’t want to sell. And I understand. So the only way to really achieve that objective is to dilute the shareholders, which means issuing more shares,” Mr. Monzon explained.
The bourse operator had pegged broker ownership at 26.44% out of 84,997,899 outstanding shares as of Feb. 28, higher than the 20% single industry ownership cap set by Republic Act No. 8799, or the Securities Regulation Code.
Item C of RA 8799’s Section 33.2 states that “no person may beneficially own or control, directly or indirectly, more than five percent of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent of the voting rights of the Exchange.”
The PSE said about 7.26% of outstanding shares were held by brokers’ principal shareholders and related parties under omnibus client accounts, and therefore were not included in the broker ownership report it had submitted.
This is despite efforts to bring down ownership of trading participants last year, including a real-time broker ownership monitoring system that automatically prevents them from placing a buy order for PSE shares should their accounts exceed the limit.
Mr. Monzon did not provide a timetable for the planned offer, citing a need to monitor market conditions first.
“When you issue new shares, the economic climate has to be correct, because you need investors to invest. Right now we’re not yet at that point,” Mr. Monzon said.
The PSE started working on bringing down broker ownership as part of efforts to secure exemptive relief from the SEC for its proposed acquisition of the Philippine Dealing System Holdings Corp. (PDSHC).
While the PSE tried to reduce broker ownership, the proposed merger was further stalled by the Land Bank of the Philippines’ counter offer to acquire PDSHC.
“We’re waiting to see what LANDBANK will do, taking into account the position that we will not compete directly with a government agency,” Mr. Monzon said.
“We are still hoping to integrate the fixed income and equities exchange. We have not given up hope, our aspiration for that, which is the way it is on other projects.” — Arra B. Francia