THE SECURITIES and Exchange Commission (SEC) eased the minimum free float requirements for giant initial public offerings (IPO), a move which will pave the best way for mega-IPOs within the Philippines.
SEC Memorandum Circular No. 11 introduced a tiered minimum public ownership framework for firms searching for to list shares on the stock exchange.
Under the circular signed by SEC Chairperson Francisco Ed. Lim on Feb. 24, firms with an expected market capitalization of over P50 billion on the time of listing must have a minimum public float of 15%. That is subject to a minimum offer size of P10 billion.
The 15% minimum public float is higher than the 12% that was proposed within the SEC’s draft circular.
Nevertheless, that is lower than the 20% minimum public float that was imposed on all firms going public no matter market capitalization.
“Adopting a tiered minimum public ownership framework provides a proportionate and market-aligned approach that preserves the long-term advantages of adequate public float while addressing present-day constraints in demand absorption for giant issuances, thereby supporting capital formation and inspiring more firms to pursue listing within the Philippines,” the SEC said within the circular.
For firms with an expected market cap of over P1 billion but not exceeding P50 billion, they need to have a minimum public float of 20%, subject to a suggestion size of P250 million.
Corporations with an expected market cap of over P500 million but not greater than P1 billion must have a minimum initial public ownership of 25%. The IPO must have a minimum offer size of P165 million.
Firms with a market cap not exceeding P500 million must have a public float of not less than 33%.
The SEC said that for firms with “exceptionally large” expected market cap on 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 on the time of listing of not lower than P200 billion. Provided that such minimum initial public ownership shall in no case be lower than 12%,” the SEC said.
Nevertheless, the SEC will determine an organization’s eligibility for the lower public float based on expected market cap, minimum offer size or minimum variety of shares held by the general public, in addition to safeguards to make sure adequate liquidity and fair price discovery.
MORE LISTINGS?
This will likely clear the trail 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 might peg the corporate’s valuation to not less than $8 billion.
“Hopefully this makes it easier for GCash and Maya to contemplate doing their mega-IPOs within the Philippines. The principles could also facilitate the IPO of Land Bank of the Philippines as the federal government would have the opportunity to maintain a bigger stake within 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 brand new rules could allow Mynt to maneuver forward with its IPO as early as this 12 months.
“This enables 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 firms must have a 12.5% or 10% public float.
“I consider the 15% floor tries to fulfill the clamor for lower minimum float (previously at 20%). If we still desired to be counted within the MSCI indices — we really want to have the float at closer to twenty%,” he said.
SEC’s Mr. Lim previously said that the push for a tiered minimum public float requirement stems from the constraints of the 20% rule, which he described as a “one-size-fits-all” approach that doesn’t account for differences in company market capitalization.
POST-LISTING REQUIREMENT
Under the SEC circular, firms are required to take care of a set minimum level of public ownership corresponding to their tier.
Corporations with a market cap exceeding P50 billion on the time of listing must maintain not less than 15% public float, while those with lower than P50 billion should keep a 20% minimum float.
If public ownership falls below the required level, the corporate should restore the general public float to the mandated level within six months from the date of the drop.
The corporate can also be required to right away submit a public ownership report back to the SEC inside the subsequent business day after determining the general public float has fallen below the minimum level. The corporate also has to submit a marketing strategy detailing steps it could undertake to lift the general public float to the required level.
The circular also noted that firms that conducted an IPO before the effectivity of those rules shall be subject to the minimum public ownership percentage under the principles in effect on the time of their listing.
Corporations that don’t comply with the necessities may face suspension, and revocation of their registration. — Alexandria Grace C. Magno