PSE opens backdoor listing to public

MANILA, Philippines - The Philippine Stock Exchange (PSE) is tightening its guidelines regarding backdoor listings by giving the public a chance to invest in new backdoor-listed firms.

The proposed amendments outline the new fundraising requirements for such companies, the operator of the country’s sole stock exchange said in a consultation paper released for public comments.

PSE 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 usually 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 the backdoor to “conduct a public offering before it will be allowed to conduct a private fundraising exercise including private placements and swaps.”