SEC approves changes to PSE listing rules

The Securities and Exchange Commission has approved amendments to the listing rules of the Philippine Stock Exchange that include giving small investors a 10-percent discount on the offer price of shares under an initial public offering (IPO).

The SEC approved the proposed IPO rules of the PSE despite objections by the Investment Houses Association of the Philippines (IHAP), which argued that a market discount would only create price distortions in the market and could result in the dumping of shares on the first day of listing.

"We feel it is a good thing. This would encourage small investors to invest in the market and perk up the market. This might even curb the growing number of investment scams that offer 10 to 15 percent interests," SEC Chairman Lilia R. Bautista said.

Bautista said if only IHAP could substantiate their claims, then the SEC can take a look at the rules again and amend them.

In a position paper submitted to the SEC, IHAP said the discount will not perk up the market as it is only a one-time activity. It added that the discount is a form of subsidy and may not provide good entrepreneurial or investment values.

The PSE, on the other hand, said there was no basis for IHAP to claim that the buyers of the discounted shares would dump their shares on the very first day. PSE stressed the shares with discounted price accounts for only 10-percent of the total floated shares and would have less impact on the market price.

The PSE said its long-term goal is to achieve a broad investor base that will eventually become active participants in the market.

Jose P. Aquino, head of the Securities and Exchange Commission’s Market Regulation Department, said prospective issuers welcomed the PSE proposal and were willing to give a discount on their IPOs to encourage investments in the market.

Patterned after the Hong Kong and Malaysian Stock Exchanges, the PSE proposal on the IPO discount was adopted to expand investor base and make the public more aware of the benefits of the equities market.

Small investors are expected to see a guaranteed rate of return on their investment since they would be buying the IPO shares at 10 percent less than what would be offered to other investors. The PSE defines small investors as those who will subscribe to shares not exceeding P25,000.