PSE may ease rules to attract more SMEs

Hoping to attract more small and medium enterprises (SMEs) to offer their shares to the public, the Philippine Stock Exchange (PSE) plans to relax the rules involving the proportion of ownership of the majority stockholders and the lock-up period of these shares.

Based on the set proposed amendments to the PSE’s Listing Rules, the period within which the existing SME owners can retain at least 51 percent of the company will be extended from one year to three years. "This is to ensure that the existing owners would continue to support the company until the completion of the three-year business plan," the PSE said.

Under the present rules, the PSE allows the listing of at least 20 percent of the authorized capital stock of an SME on the condition that the existing owners hold on to a minimum of 51 percent equity during the first year of being listed.

In addition, the PSE said it would consider the extension of the lock-up period of share ownership to a minimum of two years after listing, from the present one-year restriction.

A lock-up period disallows all the company’s existing stockholders to sell, assign or dispose in any manner their shares after listing.

The lock-up would also apply to shareholders who have availed of any issuance of shares through private placements, assets for shares swap or any similar transaction, or instruments such as convertible bonds, warrants within 180 days prior to listing, with the transaction price lower than that of the initial public offering (IPO) price.

The PSE has also proposed that the P5-million minimum requirement in net tangible assets of the prospective SME issuer be totally waived, instead sticking to just the required authorized capital requirement of between P20 million to P100 million.

"The net tangible assets shall be removed in this provision. This is an old accounting term which does not include software and other system applications for IT companies," the PSE said.

PSE chairperson Vivian Yuchengco earlier said a major thrust of the exchange next year will be on the listing of more SMEs.

"We will push for the listing of SMEs nationwide," she stressed. "We have been approached by the Small Business Guaranty Fund Corp. (SBFC) who presented us with a short list of five to 10 SMEs ripe and ready for the stock marker."

The PSE put up a third board, the SME board, in 2001 to serve as a "nursery marker" for young and small companies but with high potential for growth. However, the economic difficulties and the negative image created on the stock market by the BW Resources trading scandal were enough deterrents that sidelined the SMEs’ plans to go public.

To qualify for listing at the SME board, companies should have an authorized capital of P20 million to P100 million; a paid-up capital of at least 25 percent; and at least a two-year record of positive net operating income, among others.

Since the SME board was established, only one company has entered its registry, the Makati-based information technology (IT) service provider SQL*Wizard in May 2001. But another company, financing firm Makati Finance Corp. is set to list at the SME Board early next year after recently completing its IPO, while an affiliate, online investment matchmaker Cashrounds.com currently has a pending IPO application to list in the same board.