ALBAY Rep. Raymond Adrian E. Salceda said the Philippine Stock Exchange’s (PSE) rule requiring corporations to supply at the very least P1 billion or 20% of their market capitalization when listing preferred shares has made it difficult for subsidiaries of listed corporations to tap the stock market.
“The present rule allows any SEC-registered company to do an IPO (initial public offering) of preferred shares, but with very specific conditions: P1-billion offering or 20% of the market cap,” Mr. Salceda said.
“There are just a few construction corporations and a few small energy corporations which might be occupied with doing this route. Nevertheless it involves all the principles of an IPO.”
Under the principles introduced by the PSE in 2022, corporations may list preferred shares without listing common shares, provided they provide at the very least P1 billion or 20% of market capitalization and have at the very least 1,000 stockholders.
“Also, the rule is specifically 20% of market cap or P1 billion, whichever is higher,” Mr. Salceda said. “The 20% rule is simply too high for plenty of subsidiaries of already-listed corporations.”
“In practice, the workaround has been for the listed mother company to simply list prefs on their very own and distribute proceeds to subsidiaries,” he said.
“The workaround has limits though because more often than not, the needs of only one subsidiary are also too small for sprawling conglomerates to hassle listing prefs for them.”
“There’s a giant listed company with a foreign partner in one in all its subsidiaries that explored prefs to finance its dams and wind projects, but that concept was shelved,” he added.
Mr. Salceda said the resolution he filed goals to make such listings easier.
“I wrote this resolution because I felt that this clarification is a particularly low-hanging fruit, with little or no risk to each the system and small investors,” he said.
“Since the subsidiary is ‘chaperoned’ by the listed parent company, then the principles also needs to indicate that it’s the parent that’s answerable to the small investors,” he added.
“Just because the subsidiary’s disclosures can even be made through the parent.”
The resolution, initially assigned to the Committee on Trade and Industry, has been pending with the Committee on Banks and Financial Intermediaries since Oct. 8.
It also calls for safeguards similar to consolidated group reporting and transparent disclosures of related-party transactions. — Alexandria Grace C. Magno