SEC set to okay 10% discount on initial public offerings

The Securities and Exchange Commission is likely to approve the proposal of the Philippine Stock Exchange to give a 10-percent discount on all initial public offerings, saying this could perk up liquidity in the equities market.

SEC Chairperson Lilia R. Bautista said: "We are poised to approve the PSE’s proposal on the mandatory discount on IPOs. It will be up to the PSE to determine whether the mandatory allocation will promote IPOs."

Jose P. Aquino, head of the SEC’s Market Regulation Department, said prospective issuers have welcomed the PSE proposal and were willing to give a discount on the offer price of shares under an IPO.

This despite the objection posed by the Investment Houses Association of the Philippines (IHAP), the umbrella organization of the country’s investment houses, on fears that this could do more harm than good to the capital market.

IHAP had expressed concern about the effect of the proposal once the shares are listed on the exchange. Small investors, aiming to get a quick buck, could unload their shares on the first day of listing, to the detriment of other investors.

Also, IHAP said the proposal would entail additional costs for investment houses.

The PSE proposal forms part of the revised listing rules of the exchange patterned after the Hong Kong and Malaysian Stock Exchanges. This was adopted to boost liquidity in their respective markets.