SEC lowers IPO float for big firms

THE SECURITIES and Exchange Commission (SEC) eased the minimum free float requirements for large initial public offerings (IPO), a move that may pave the way for mega-IPOs in the Philippines.

SEC Memorandum Circular No. 11 introduced a tiered minimum public ownership framework for companies seeking to list shares on the stock exchange.

Under the circular signed by SEC Chairperson Francisco Ed. Lim on Feb. 24, companies with an expected market capitalization of over P50 billion at the time of listing should have a minimum public float of 15%. This is subject to a minimum offer size of P10 billion.

The 15% minimum public float is higher than the 12% that was proposed in the SEC’s draft circular.

However, this is lower than the 20% minimum public float that was imposed on all companies going public regardless of market capitalization.

“Adopting a tiered minimum public ownership framework provides a proportionate and market-aligned approach that preserves the long-term benefits of adequate public float while addressing present-day constraints in demand absorption for large issuances, thereby supporting capital formation and encouraging more companies to pursue listing in the Philippines,” the SEC said in the circular. 

For companies with an expected market cap of over P1 billion but not exceeding P50 billion, they should have a minimum public float of 20%, subject to an offer size of P250 million.

Companies with an expected market cap of over P500 million but not more than P1 billion should have a minimum initial public ownership of 25%. The IPO should have a minimum offer size of P165 million.

Firms with a market cap not exceeding P500 million should have a public float of at least 33%.

The SEC said that for companies with “exceptionally large” expected market cap at the time of listing, the exchange can endorse an application for a lower minimum initial public ownership requirement.

“(This) shall only apply to issuers with an expected market capitalization at the time of listing of not less than P200 billion. Provided that such minimum initial public ownership shall in no case be lower than 12%,” the SEC said.

However, the SEC will determine a company’s eligibility for the lower public float based on expected market cap, minimum offer size or minimum number of shares held by the public, as well as safeguards to ensure adequate liquidity and fair price discovery.

MORE LISTINGS?
This may clear the path for the long-awaited IPO of Globe Fintech Innovations (Mynt), the parent company of GCash, which earlier said that a 20% minimum public float was too high for its offering that could peg the company’s valuation to at least $8 billion.

“Hopefully this makes it easier for GCash and Maya to consider doing their mega-IPOs in the Philippines. The rules could also facilitate the IPO of Land Bank of the Philippines as the government would be able to keep a larger stake in the bank,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

DragonFi Securities Equity Analyst Jarrod Leighton M. Tin said the new rules could allow Mynt to move forward with its IPO as early as this year.

“This allows major issuers to access public markets while diluting a smaller portion of ownership. More importantly, a lower public float reduces initial tradable supply —potentially supporting stronger price stability and mitigating early selling pressure, which has historically weighed on larger IPOs,” Mr. Tin said.

Investment & Capital Corporation of the Philippines (ICCP) President and Chief Operating Officer Jesus Mariano P. Ocampo said the lower public float is a middle ground after debates over whether large companies should have a 12.5% or 10% public float.

“I believe the 15% floor tries to meet the clamor for lower minimum float (previously at 20%).  If we still wanted to be counted in the MSCI indices — we actually need to have the float at closer to 20%,” he said.

SEC’s Mr. Lim previously said that the push for a tiered minimum public float requirement stems from the limitations of the 20% rule, which he described as a “one-size-fits-all” approach that does not account for differences in company market capitalization.

POST-LISTING REQUIREMENT
Under the SEC circular, companies are required to maintain a fixed minimum level of public ownership corresponding to their tier.

Companies with a market cap exceeding P50 billion at the time of listing must maintain at least 15% public float, while those with less than P50 billion should keep a 20% minimum float.

If public ownership falls below the required level, the company should restore the public float to the mandated level within six months from the date of the drop.

The company is also required to immediately submit a public ownership report to the SEC within the next business day after determining the public float has fallen below the minimum level. The company also has to submit a business plan detailing steps it would undertake to raise the public float to the required level.

The circular also noted that companies that conducted an IPO before the effectivity of these rules will be subject to the minimum public ownership percentage under the rules in effect at the time of their listing.

Companies that do not comply with the requirements may face suspension, and revocation of their registration. — Alexandria Grace C. Magno