THE SECURITIES and Exchange The Commission (SEC) has reduced emissions minimum free float requiredments in the first great community offerings (IPO), a possible move pave the way for mega-IPOs in the Philippines.
SEC Memorandum Circular No. 11 introduced a limited public ownership framework for companies seeking to list shares on the stock exchange.
Under the circular signed by SEC Chairman Francisco Ed. Lim on February 24, companies with an expected market capitalization of more than P50 billion at the time of listing must have a public float of at least 15%. This is below the minimum offering size of P10 billion.
The 15% minimum public float is higher than the 12% proposed in the SEC’s draft circular.
However, this is less than the 20% minimum public float that was set for all companies going public regardless of market capitalization.
“Adopting a low-level public ownership framework provides an equitable and market-friendly approach that preserves the long-term benefits of adequate public flotation while addressing today’s challenges of obtaining large-scale issuances, thereby supporting capital formation and encouraging more companies to pursue listing in the Philippines,” the SEC said.
For companies with an expected market capitalization of P1 billion but not exceeding P50 billion, they must have a minimum public float of 20%, subject to an offering size of P250 million.
Companies with an expected market capitalization of more than P500 million but not more than P1 billion must have an initial public ownership of 25%. The IPO must have a minimum offering size of P165 million.
Firms with a market capitalization of not more than P500 million must have a public float of at least 33%.
The SEC said that for companies with a “significantly large” market capitalization expected at the time of listing, the exchange could approve a request for a lower initial public ownership requirement.
“(This) shall apply only to issuers with an expected market capitalization at the time of listing of not less than P200 billion. Provided that such initial public ownership shall not be less than 12%,” the SEC said.
However, the SEC will determine a company’s eligibility for a low public float based on expected market valuation, minimum offering size or minimum number of publicly held shares, and safeguards to ensure adequate liquidity and fair pricing.
TOO MUCH LIST?
This could clear the way for the long-awaited IPO of Globe Fintech Innovations (Mynt), GCash’s parent company, which previously said a 20% public float was too high for its offering that could hold the company’s valuation to at least $8 billion.
“We hope this makes it easier for GCash and Maya to consider doing their mega-IPOs in the Philippines. The rules may also facilitate the IPO of the Land Bank of the Philippines as the government will be able to keep a larger stake in the bank,” said the Managing Director of China Bank Capital Corp. Juan Paolo E. Colet 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 earlier this year.
“This allows large producers to access the public markets while cleaning up a small portion of ownership. More importantly, the low public float reduces the initial offer to be sold – which can support strong price stability and reduce the pressure of early sales, which has historically weighed on large IPOs,” said Mr. Tin.
President of the Investment & Capital Corporation of the Philippines (ICCP) and Chief Operating Officer, Jesus Mariano P. Ocampo said that the public float is in the middle after the debates about whether large companies should have 12.5% or 10% of the public float.
“I believe that the 15% floor is trying to meet the cry of the lower float (which was 20%). If we still want to be counted in the MSCI indices – we actually need it they are close to 20%,” he said.
Mr. The SEC’s Lim previously said the push for a tiered public float stemmed from the limitations of the 20% rule, which he described as an “all-equals” approach that doesn’t account for differences in a company’s market capitalization.
LISTING REQUIREMENTS
Under the SEC circular, companies are required to maintain the prescribed minimum the level of social identity that corresponds to their class.
Companies with a market capitalization of more than P50 billion at the time of listing must maintain at least 15% of the public float, while those with a capitalization of less than P50 billion must maintain a minimum float of 20%.
If the public ownership falls below the required level, the company must restore the public float to the authorized level bysix months from the date of descent.
The company is also required to immediately submit a public ownership report to the SEC within the next business day after determining that the public’s float has fallen below the threshold. The company must also submit a business plan detailing the steps it can take to raise the community level to the required level.
The circular also noted that companies that conducted an IPO before the implementation of these rules will have a lower percentage of public ownership under the rules in force 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
