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By Arra B. Francia

July eyed for higher minimum float

Posted on May 29, 2017

COMPANIES planning initial public offerings (IPO) could face a higher minimum public ownership requirement by July 1, the head of the Securities and Exchange Commission (SEC) said last week, adding that firms already listed may be given up to a year to meet the stiffer regulation.

The Securities and Exchange Commission (SEC) had initially planned to hike the minimum public float requirement as early as last year, but was prompted to delay due to adverse market conditions.
Asked when the SEC will release the rules on the increased public float, SEC Chairperson Teresita J. Herbosa replied in an interview: “It will probably be in effect for IPOs starting July 1.”

“We’ll invite all stakeholders to come and discuss it, then we’ll come out with the final version,” Ms. Herbosa told reporters after the 5th annual forum on Good Governance, Ethics and Compliance at the Conrad Manila hotel on May 24.

The immediate plan, she said, is for companies wanting to conduct IPOs to sell at least 15% of their issued and outstanding common shares to the public, compared to the current minimum of 10%.

Several companies are currently in line to list.

Awaiting Philippine Stock Exchange (PSE) approval for IPO applications are Bermaz Auto Bhd. (P1.24 billion) and Pure Energy Holdings Corp. (P1.58 billion).

The IPO applications of Chelsea Logistics Corp. for P8 billion; Expresspay, Inc. for P528 million; Xeleb Technologies, Inc. for P751.8 million, and Audiowav Media, Inc. for P2.66 billion are still pending with the SEC.

This year has so far seen only Wilcon Depot, Inc. list -- on March 31.

Two more firms are scheduled to debut on the PSE this week, namely: cement manufacturer Eagle Cement Corp. today and property developer Cebu Landmasters, Inc. on Friday, June 2.

Companies already listed on the PSE will have a year to comply with the new requirement.

“So the companies which have not attained the 15% or higher, they should tell us if it’s really impossible or not and before July 1 of 2018 if they could achieve it or not,” Ms. Herbosa said, adding: “We would also consider market (conditions).”

“If nobody buys, what can you do? Then maybe we can tell them to delist; maybe that’s the solution.”

Ms. Herbosa said 15% is a relatively low floor, noting that the average float for listed companies ranges from 20% to 25%.

“We think if you went on IPO you must have a credible public ownership because you get some advantages by listing on the exchange,” she added.

In an earlier interview, Eagle Cement President and Chief Executive Officer John Paul L. Ang said his company was ready to meet a higher requirement, once implemented.

The regulator had initially planned to hike the minimum public float requirement as early as last year, but was prompted to delay due to adverse market conditions.

The SEC chief earlier said that she wants to raise the minimum public float requirement to 20% before ending her seven-year term in May 2018, in order to encourage more Filipinos to participate in the capital markets.

PSE Chief Operating Officer Raul S. Refran was not immediately available when sought for comment.

While raising the public float floor would be positive for the market, Diversified Securities, Inc. equities trader Aniceto K. Pangan said 30% and above would be even better.

“Generally, the lower the required public float of a listed company, the more illiquid the transactions of these companies [would be]... thus the more difficult to get the right valuations,” Mr. Pangan explained in a mobile phone message over the weekend when sought for comment.

“A good public float would be 30% and above.”

He added that an increased minimum public float should be able to attract more foreign investors.

“That would be foreign investor-friendly,” Mr. Pangan said.

“When the public float is so small, definitely they’re considered very minor investors in a particular company...,” he explained.

“Foreign investors usually shy away from investing in those with lower than 30% public float.”