Guidelines for IPO cornerstone investors issued

MANILA, Philippines — The Securities and Exchange Commission (SEC) has set the guidelines for cornerstone investors in initial public offerings (IPOs) as part of its continuing efforts to boost investor participation in the capital market.

Under the SEC guidelines issued on April 11, cornerstone investment agreements will form part of the material contracts in an issuer’s registration statement required to be submitted to the commission.

The agreement should include the allocation guaranteed to a cornerstone investor, which must be signed on or prior to the pricing event of the IPO.

The SEC requires the cornerstone investor to firmly commit to purchase the shares, provided that the final offer price falls within the preferred range as agreed upon.

According to the commission, the issuer must also disclose in its final prospectus certain details about its cornerstone investors, including the number of participating cornerstone investors and their respective profile descriptions.

Also required to be disclosed are the number and type of securities proposed to be issued or offered to such investors as well as other information relevant to the investment.

“A cornerstone investor may also have representation in the board of the registered issuer, provided that it owns only the minimum required number of shares for election,” the SEC said.

“Information provided to such investors will be the same as what is made available to the public or those contained in the final prospectus,” it said.

The SEC describes a cornerstone investor as one with whom a registrant’s offer shares are preferentially placed, with a guaranteed allocation at the final offer price, provided that the final offer price is within the offer price range preferred by the cornerstone investor and agreed with the issuer.

It said such investors have been shown to stimulate investor demand in an IPO and have been seen to boost confidence and deliver a positive signal to the market.