COMPANIES are hesitant about holding an initial public offering (IPO) due to the tough regulatory requirements set by the Philippine Stock Exchange, Inc. (PSE), an analyst said.
During BusinessWorld Insights on the stock market’s outlook, April Lynn Lee-Tan, COL Financial Group, Inc. chief equity strategist, told forum participants on Tuesday that interest in going public is high, but companies are put off by regulatory requirements.
“We’re not seeing more companies list. I think the regulatory requirements are quite difficult,” Ms. Lee-Tan said.
She said companies that are keen to list would need to undergo auditing from big firms, shelling out a large amount of money in the process.
“Right now, a lot of companies would like to list, but one of the requirements for them is to be audited by big audit firms,” she said, adding that the process could cost them “millions of pesos.”
“And it’s also very expensive for companies to be listed. This is one of the issues that are facing companies that would want to list,” she added.
Additionally, she said that companies are not initially in favor of the valuation given to them by the market and how it would compare with existing listings.
She said investors would prefer investing in companies with lower single-digit price-earnings (P/E) ratios than a company with double digits. However, companies are not willing to compromise due to the lower valuation, she said.
The PSE earlier announced that it would host a series of masterclasses aimed at equipping companies with the necessary resources for a potential IPO.
Its Learn IPO Strategies and Tactics (LIST) class is exclusively for companies engaging in the PSE’s listing program.
“PSE LIST was designed for companies that may start the paperwork on their listing applications anytime,” Ramon S. Monzon, PSE president and chief executive officer, said in a press release.
“We want the officers of these companies to be better equipped during the IPO application process by getting pertinent information directly from the regulators,” he added.
The PSE said that more than 40 companies are registered with its Listing Engagement and Assistance Program that are considered eligible and are prepared to conduct an IPO. — Adrian H. Halili