SEC revives plan to hike minimum public float

MANILA, Philippines - The Securities and Exchange Commission (SEC) is reviving plans to increase the required minimum public float of locally listed companies.

Corporate regulators will conduct a comprehensive study to justify the imposition of the 12-15 percent minimum public ownership level from the current 10 percent, the agency’s top official said.

“(Higher public float requirement) is really happening this year insofar as to finding out the justification for the increase,” said SEC chairperson Teresita J. Herbosa.

“Of course, we would listen to the position of the Philippine Stock Exchange (PSE) and the issuers whether they could agree to an increase in the minimum public float,” Herbosa said.

Specifically, Vicente Graciano P. Felizmenio Jr., director of SEC’s Markets and Securities Regulation Department, was tasked to lead the study.

To date, the PSE implements a 10-percent minimum public float as part of its efforts to provide a fair and efficient facility for price discovery and ensure that sufficient liquidity exists.

In June, PSE delisted state-run Philippine National Oil Co.-Exploration Corp. for failing to comply with the public ownership rule despite an 18-month leeway.

For its study, the SEC will coordinate with the International Capital Markets Association to check international benchmarks, Herbosa said, adding that the public ownership level should ideally rise to 15 percent.

Despite negative investor sentiments in the local bourse, the SEC believes that there will be demand for additional shares.

“There is always a market for investments in equities even if you are talking about domestic buyers. But they are quite discerning, they have to really look at the company and the financials,” Herbosa said.

Since posting its 31st all-time high at 7,392.20 on May 15, the benchmark PSE index ended 2012 at 5,889.83. On Friday, the main index slumped further to 5,842.88 as foreign fund managers continue to exit the local stock market.

Herbosa said the recommendations should be ready by mid-2014, with SEC also checking the feasibility of imposing different public float per sector.

Stock markets in Hong Kong, Singapore and Thailand already impose minimum float requirements of between 10 percent and 25 percent.

“It’s really better if more shares are available to the public and the public will have more choices,” Herbosa said, adding that it is not good to see firms listing in the PSE and settling at 10 percent public ownership just to take advantage of tax perks like lower transaction fees.

As of end-March, the free float level in the local bourse hit 33.4 percent, PSE data showed. In contrast, shares in public hands hit 30 percent of total domestic market capitalization as of end-2011.