PSE to tap institutional investors

The Philippine Stock Exchange (PSE) intends to tap the International Finance Corp. (IFC) and the Bankers Association of the Philippines (BAP) as institutional investors to frontload its public listing planned next year.

PSE chairperson Vivian Yuchengco said the IFC, the World Bank’s private sector investment arm, has expressed interest in taking up a 10 percent stake in the PSE once it gets listed.

The BAP, on the other hand, could engage in a share swap with the PSE on the fixed income exchange that the two groups also plans to launch by next year.

The PSE has taken up a 20 percent interest in the bond exchange that would be run by the BAP using the exchange platform for trading fixed income instruments such as government securities and corporate bonds.

Yuchengco said the PSE can swap its stake in the fixed income exchange or its shareholdings in the Philippine Clearing System (PCD), the central lodging unit for stock transactions. The PSE owns a third of PCD; another one-third is owned by the BAP; and the remaining third by three other banks – RCBC, Equitable PCI Bank and Citibank.

Upon its demutualization, or conversion from an exclusive club to a stock corporation in August last year, the PSE was required under the Securities Regulation Code to offer its shares to the public through an initial public offering (IPO), the process which the PSE itself supervises.

The Securities and Exchange Commission, the administrator of the SRC, has asked the PSE to proceed with its public listing to complete its demutualization although Yuchengco said from as much as 80 percent, the SEC has agreed to initially allow only about 51 percent of the Exchange opened up.

The PSE’s capital structure has a fully subscribed and paid-up base of P9.2 million with 184 broker-members alloted 50,000 shares each at P1 par value.With the planned IPO, the PSE would have to issue new shares to accommodate new investors. However, the SRC also caps a limit on industry group ownership at 20 percent, which means the member-brokers will have to let the other investors take up a significant 80 percent shareholding.

Under the SRC, voting rights – whether directly or indirectly – are limited to five percent for an individual and 20 percent for an industry or business group. The SEC, however, may exempt an applicant from this prohibition "where it finds that such an ownership or control will not negatively impact on the exchange’s ability to effectively operate in the public interest."