MANILA, Philippines - The Philippine Stock Exchange (PSE) sees more companies lining up to list following the approval by the Securities and Exchange Commission of the proposed amendments to the rules on listing by way of introduction.
“With the revival of our rules on listing by way of introduction, we are optimistic of more listings on the bourse. We are grateful for the SEC’s support of our enhanced rules as this provides issuers an alternative listing venue in order to spur more activity in the stock market,” said Hans Sicat, president and chief executive officer of the PSE.
Sicat pointed out that the Guidelines for Fairness Opinions and Valuation Reports, one of the key features of the amended rules, is a step towards enhancing investor confidence and protection.
The PSE temporarily suspended the implementation of the rules in February 2010 to address the issue of valuation.
A company may apply for listing by way of introduction when it is mandated by law or government agencies to list its shares on the bourse.
Under the amended rules, the applicant shall determine the initial listing price of its securities on the listing date which is duly supported by a fairness opinion prepared by an independent and reputable firm. These include investment banks, financial advisory firms, and accounting firms duly registered or licensed by the SEC and accredited by the PSE. The guidelines provide the criteria for the accreditation of these firms.
The amended rules also specify the applicable lock-up requirements on the securities of the applicant company. The lock-up is applicable to the applicant company’s existing shareholders who own at least 10 percent of the company’s issued and outstanding capital.
The lock-up period starts on the listing date and the applicable period depends on the board in which the applicant company is listed under — 180 days for the First Board, 365 days for the Second Board and two years for the SME Board.
The amended rules also include a provision on the lifting of the trading band on the listing date. The trading band on the applicant company’s securities to be listed shall be lifted on the listing date in order to allow market forces to determine the price of the securities of the applicant company. After the listing date, the trading band shall be reinstated.
To ensure compliance with the mandatory public offering requirement of applicant companies, the amended rules likewise provides that the PSE shall impose any one or a combination of the following sanctions should the company fail to conduct the mandatory public offering within one one year from listing:
• suspend the trading of the company’s securities;
• sanction the company by, among others, doubling the annual listing maintenance fees payable by the company;
• or subject to the provisions of the Corporation Code and the rules and regulations of the SEC, require the company to buy-back its securities within 90 days from the lapse of the one-year period and delist the company’s securities.
The rules also prohibit a backdoor listing prior to the conduct of the mandatory public offering to prevent any abuse of the rules by availing of its benefits without a bona fide intention to carry out the company’s business plans.