PSE defers IPOs to 2003

The Philippine Stock Exchange (PSE) plans to relax its policy on additional listings and rights offering which would make it less stringent for outside investors to buy a minority stake of not more than 10 percent of a listed company’s capital stock.

Listing Department supervisor Claudine Cruz said under the proposed amendments, the requirement for a rights offering will be waived in cases where the new voting shares are to be issued to independent or unrelated parties and would only need the approval of shareholders as well as proper disclosure to the market regulators.

But for related parties – existing shareholders, management, officials of affiliate firms, and others – a pre-emptive rights offering will have to be undertaken, aside from approval of a majority vote by the minority shareholders and a lock-up provision of a minimum of 180 days after the listing.

Under its existing rules on additional listing of shares, the PSE requires that a company first undertake a rights or public offering if it would be issuing more shares subscribed through various modes: private placement, debt-to-equity conversion, share-for-share or property-for-share swap, or other similar transactions.

As a general rule, the PSE said there is likely to be a significant demand for shares from existing stockholders if the price for the new shares will be at a discount higher than 10 percent of the market price or at book value, whichever is higher.

Cruz said the major amendments to this rule include the removal of the "price-test," instead using as benchmark the subscription to not more than 10 percent of the company’s issued and outstanding capital stock.

"The removal of the price test aims to cover all related party transactions regardless of the transaction price. This amendment would give the issuers flexibility in pricing the transactions subject to approval by its stockholders," she stressed.

She added, however, that the rule would exempt those transactions from a rights offering when the price is set at a premium over the prevailing market price of the stock or upon a waiver from the majority vote of the minority shareholders themselves.

Cruz said the proposed changes have been circulated to the Exchange and the listed companies for comments and will still need to be presented to the PSE board of directors for approval.