PSE to present conversion plan to members

The Philippine Stock Exchange (PSE) will present to its member-brokers today the plan approved in principle by the Securities and Exchange Commission (SEC) for its conversion to a stock corporation, paving the way for the effectivity of its demutualization on Aug. 8.

Under the conversion plan, the Exchange will cease to be a membership company and will instead be transformed into a stock corporation with common shares, which will soon be available to the public and traded at the very bourse it operates.

The PSE is required by law (the Securities Regulation Code) to convert into a demutualized company on or before Aug. 8, 2001, although a public listing would only follow at least a year after.

A major issue expected to be raised to the special membership meeting is the proposed change in the PSE’s structure, whereby a holding company will be created "for the purpose of engaging in businesses other than operating an exchange."

"A tax-free merger with a holding company is under study for the issuance of shares to the Exchange, which will then issue shares to the shareholders in exchange for the shares in the PSE," PSE president Ramon Garcia said.

He added other proposals are also under consideration in order to arrive at a conclusive study which will be presented to the stockholders for their approval.

Garcia said based on a study of the consultants from the Australian Stock Exchange, which demutualized two years ago, a diversified model is necessary to generate the required revenue streams. The PSE is priming itself up for listing through the spin-off of "profit units" such as the information technology (IT) and clearing departments to enhance the attractiveness of the bourse to investors.

As of Dec. 31, 2000, the PSE derived its revenues mainly from listing fees and other listing related activities (52 percent); IT services (27 percent); interest income (18 percent); membership (two percent); and administrative recoveries (one percent).

There are 299 listed companies at the PSE, with a total market capitalization of approximately $46.7 billion.

Based on the conversion plan, each of the 184 member-brokers eligible to subscribe to the shares and retain access to the trading facilities of the PSE would be allocated 50,000 shares at P1 par value to be fully paid, leading to a paid-up capital base of P9.2 million.

The authorized capital stock of the new PSE would hence amount to P36.8 million, a far cry from the initial P1.472 billion authorized capital base presented by the PSE which was rejected by the SEC since this includes the real estate assets donated by Ayala Land and Philippine Realty Holdings constituting the trading floors and headquarters in Ayala and Tektite buildings.