THE Philippine Stock Exchange (PSE) is urging small and medium enterprises (SMEs) to go public, especially now that listing rules for initial public offerings (IPOs) have been relaxed.
In a report to the Capital Market Development Council (CMDC), PSE President-CEO Ramon Monzon said they have posted on their website online tools to help investment houses gauge the readiness for IPO and listing of firms.
To boost its marketing campaign on the amended PSE listing rules and broaden the pool of listing candidates, PSE has also partnered with several business organizations and government agencies.
Earlier this year, the PSE amended the listing framework and this was approved by the Securities and Exchange Commission (SEC). The amendment of the listing framework aims to make the Philippines’s rules on a par with corporate regulations of the other Asean-6 economies (Indonesia, Malaysia, Singapore, Thailand and Vietnam) in the Association of Southeast Asian Nations.
In the same CMDC meeting, Monzon said the campaign will include a virtual roundtable discussion on IPO listing set on May 25. Finance Secretary Carlos G. Dominguez III will be among the key speakers during the forum. He will discuss the amended listing rules of the Main and Small, Medium and Emerging Boards of the PSE, as well as insights on the advantages and expansion opportunities for SMEs in the stock market.
For the roundtable discussion, Monzon said the PSE will also invite members of the Investment House Association of the Philippines (IHAP), advisory firms, institutional clients and executives of its top target companies, and representatives from the government.
Monzon said the PSE has distributed electronically several easy-to-read IPO listing reference materials to key stakeholders and listing applicants to widen the reach of the marketing campaign.
Dominguez also told Monzon to provide the CMDC a progress report that includes the actual number of SMEs listing in the PSE board.
Co-chaired by Dominguez; lawyer Benedicta Du-Baladad, a former president of the Financial Executives Institute of the Philippines (Finex); and SEC chairman Emilio Aquino, the CMDC is a coordinating body tasked to facilitate the development of the Philippine capital market.
The PSE’s marketing campaign kicked off last April 7 with the conduct of an online information session on the amended listing rules and introduction to the sponsor-driven listings on the Small, Medium and Emerging Board. Monzon said around 217 participants from various investment houses, law firms and other organizations took part in the session.
The amended PSE listing rules include the presentation of the sponsor-driven model for the Small, Medium and Emerging Board; removal of the requirement of positive Earnings Before Interest, Taxes, Depreciation and Amortization (Ebitda) and its replacement with the Cumulative Net Sales or Operating Revenues as a metric for the Small, Medium and Emerging Board; shortening of the required operating history from 3 to 2 years; and removal of the P100-million minimum authorized capital stock requirement.
Under the sponsor-driven model, the listing application for the company that cannot comply with the profitability or operating history requirement will be done by a PSE-accredited sponsor, which must be a licensed investment house.
Listing applicants, however, must have a Minimum Stockholder’s Equity of at least P75 million in the past three fiscal years and a net income of at least P50 million for the fiscal year immediately preceding the filing of the application, among other requirements under the amended rules.
The amended rules also grant time-bound relief for IPO applicants planning to list in the boards but were hit by the impact of the Covid-19 pandemic.
As an example: for an IPO application filed this 2021 by a company demonstrating Covid’s negative impact on its financial condition and results of operations in 2020, the PSE would just consider its 2018 and 2019 financial performance.
Long before the SEC approval of the amended listing rules, Monzon said the PSE has already been coordinating with the Department of Trade and Industry (DTI) and Board of Investments (BOI) in identifying companies ready to undertake their IPOs.
With technical and material assistance from the United States Agency for International Development (USAID), the PSE, Finex and DTI have also teamed up to provide technical inputs and support in designing a capacity-building program for SMEs, and startups, Monzon said.
Despite having one of Asia’s oldest stock exchanges and being on a par with other Asean economies in terms of corporate governance, the Philippine stock market remains small compared to its Southeast Asian neighbors. There are only 268 publicly traded firms in the PSE compared to 927 in Bursa Malaysia and 367 in the Hanoi Stock Exchange as of 2019, based on data from the World Federation of Exchanges.