THE SECURITIES and Exchange Commission (SEC) still plans to raise the minimum public ownership (MPO) requirement of publicly listed companies by yearend, but recent market volatility has made corporate regulators cautious for now.
“For the existing companies, we plan to raise it to 15%. But we’re still studying the matter because unfortunately the market is not that stable to admit this increase. Because maybe some people, because of some volatility in the market, are not yet investing,” SEC Chairperson Teresita J. Herbosa told reporters on the sidelines of a forum in Quezon City last week.
The Philippine Stock Exchange index (PSEi) — considered a local barometer of investor confidence — has been on a steady decline since notching its 10th all-time high this year on Jan. 29 at 9,058.62 — 5.845% up from end-2017’s 8,558.42 finish that was last year’s 14th peak — ending Friday at 8,467.56, down 1.06% year-to-date.
Analysts have said Philippine macroeconomic fundamentals remain sound, blaming any PSE fluctuation on foreign factors like Wall Street’s fortunes, US monetary policy moves and geopolitical tensions.
“So if you release suddenly an increase of five percentage points on a public float of 10%, then there may be no buyers at this point, or only a few shares will be sold,” Ms. Herbosa explained.
“It will be very difficult for some companies to comply with that increase.”
Once publicly listed firms raise their float to at least 15% from the prevailing 10% minimum, the next step would be to increase the requirement to 20%, which the SEC plans to implement by 2020.
The commission has identified 68 out of 264 publicly listed companies that have a public float lower than 20%, with 39 of them having an MPO less than 15%. In a presentation in June last year, the SEC said the stock exchange can raise more than P130 billion once all companies comply with the 20% MPO by 2020. That computation was based on stock prices on May 31, 2017, at a time PSEi was trading at the 7,800 level.
The higher MPO requirement among publicly listed firms is in line with a SEC memorandum circular directing companies seeking to conduct an initial public offering to have an MPO of at least 20%.
The corporate regulator said a higher public float would lead to more liquidity in the market, in turn making the PSE more attractive to institutional investors.
So far, only one firm has submitted an IPO application based on the SEC’s new rules. Del Monte Philippines, Inc., the local unit of Del Monte Pacific Limited, filed earlier this month for a P16.7-billion IPO, where it will offer about 20% of outstanding shares to the public. — Arra B. Francia