PSE’s new listing rules may attract tech firms

By Denise A. Valdez, Senior Reporter

THE Philippine bourse operator’s proposal to ease listing requirements may encourage new technology-based companies to go public despite the coronavirus pandemic.

April Lynn C. Lee-Tan, vice-president and head of research at COL Financial Group, Inc., said the Philippine Stock Exchange, Inc.’s (PSE) efforts to relax listing requirements may attract tech firms that are thriving as consumption habits have become more digital.

“Most likely (to go public are) new companies with disruptive type of businesses that will thrive under the new normal. This includes mobile wallets, food delivery businesses, online shops, etc.,” she said in an Oct. 12 e-mail to BusinessWorld.

The PSE, which lists mostly traditional businesses, said the ongoing quarantine restrictions continue to dampen investor sentiment. The PSE index (PSEi) has fallen to 5,898.47 as of Friday from starting the year at 7,742.53.

“Companies with traditional businesses (banks, property, retail, restaurants) are more vulnerable to the pandemic. Because of this, their earnings will be weak and investors don’t want to buy them,” Ms. Tan said.

“[Y]ou have to look at the performance of the stock market in other countries to appreciate that the strong performers are those that are involved in businesses that continue to grow despite the pandemic,” she added.

Ms. Tan cited the US stock market as an example, noting that online retail giant Amazon.com, Inc. and other tech companies have continued to do well this year. 

“Although the S&P 500 is strong, if you remove the tech issues, the performance of the index is much weaker,” she said.

In a presentation during a virtual forum on Oct. 7, Ms. Tan showed that Asian stocks with higher exposure to the tech sector were more resilient through the pandemic than those with less or none.

Citing data as of Oct. 5, she said China’s SZCOMP (+24.7%), South Korea’s KOSDAQ (+28.2%) and Taiwan’s TWSE (+4.6%) have outperformed the Philippines’ PSEi (-24%), Indonesia’s JCI (-21.3%) and Thailand’s SET (-21.2%). Exposure to tech stocks was greater for those that did better (China 23.2%, South Korea 34.6%, Taiwan, 51.8%) than those that didn’t (Philippines 0%, Indonesia 0.3%, Thailand 1.2%).

But this may change, as the PSE’s proposed amendments to the listing rules may see more initial public offerings (IPO) from the tech sector which has been growing in recent months.

The bourse operator is proposing to remove the P500-million minimum market capitalization requirement (for the main board) and the requirement of a positive EBITDA (earnings before interest, taxes, depreciation and amortization) in at least two of the last three fiscal years before a filing application (for the small and medium enterprises board).

“[I]f Instapay and Pesonet were companies that could list, they would be popular. GCash and PayMaya would also be popular IPOs,” Ms. Tan said.

Globe Fintech Innovations, Inc. (Mynt), the operator of GCash, said it is open to doing an IPO but there is no specific plan at the moment.

“The Mynt management team’s goal is to provide value to its stakeholders including our customers and shareholders. This may be done through value accretion as a private company or through a public offering,” Martha M. Sazon, chief executive officer of Mynt, said in an Oct. 16 e-mail to BusinessWorld.

“[O]ur focus at the moment is to continuously innovate and develop relevant use cases for the consumers… Whether this path leads to an IPO is something we can talk about in the future,” she added.

She noted the tech industry is seeing “exponential growth” during the pandemic, and activity has not dipped despite the relaxation of quarantine rules over the past months.

“[M]ore users now recognize the importance of digital services in their daily lives,” Ms. Sazon said.

Voyager Innovations, Inc., the operator of PayMaya, declined to comment

The PSE is currently evaluating comments from stakeholders on its draft amendment to the listing rules, after which it will finalize the proposal and submit it to the Securities and Exchange Commission for approval.