PSE allows public more time to study backdoor listing rules

MANILA, Philippines - The Philippine Stock Exchange (PSE) has granted the public more time to comment on the planned tightening of backdoor listing rules.

The proposed amendments outline the new fundraising requirements for such companies, giving the public a chance to invest in new backdoor-listed firms.

“The PSE is extending the period for public comments on the proposed revisions to the Rules on Backdoor Listing and Guidelines on the Comprehensive Corporate Disclosure for Backdoor Listings until Sept. 27,” the PSE said in a memorandum.

Prior to the extension, the operator of the country’s stock exchange said it will only accept public insights until Sept. 20.

The PSE earlier said it started a review of existing rules “in light of the recent backdoor listings and the clamor from the market to give the public an opportunity to participate in fundraising initiatives of a company that is backdoor listed.”

The review aims to “clarify the circumstances that trigger the application of [backdoor listing] rules...and expand the obligations of the listed company with the intent of promoting transparency and ultimately further protecting the interest of the investing public.”

A backdoor listing occurs when a listed firm is acquired by a private company, resulting in a change in business. It is believed to be a cheaper and faster way to achieve listing status.

The Securities and Exchange Commission defines backdoor listing as the process of taking over and reorganizing listed, but otherwise dormant, corporations without going through the requirements for registration.

The main changes proposed by the PSE are the requirement on public offering and the expanded definition of a backdoor listing.

The PSE is planning to mandate companies that listed via backdoor to “conduct a public offering before it will be allowed to conduct a private fundraising exercise including private placements and swaps.”

“As currently worded, there are no restrictions or requirements in the subsequent modes of fundraising activities for a listed company that underwent backdoor listing,” the PSE said.

Recent backdoor listings in the local bourse include brandy maker  Emperador Inc. (through Touch Solutions Inc.),  the local unit of Macau casino giant Melco Crown Entertainment Ltd. (through Manchester International Holdings Unlimited Corp.) and conglomerate LT Group Inc. of magnate Lucio Tan (through Tanduay Holdings Inc.) that raised P16.2 billion, P37.7 billion and P15.1 billion, respectively, via private share sales.

Furthermore, the PSE said backdoor listing will now include transactions wherein a listed member of a group of companies becomes the parent company or the controlling stockholder of other group members.