A significant shift is brewing in the Philippine stock market, as regulators propose a new system for how much of a company must be available for public ownership.
The Securities and Exchange Commission (SEC) has unveiled a draft plan to move away from a single, rigid rule and embrace a tiered approach. This change aims to make it easier for companies of all sizes to list their shares and attract investment.
Currently, a flat 20% public ownership rule exists, but officials believe this “one-size-fits-all” approach stifles growth, particularly for larger companies. The new framework recognizes that a massive corporation can maintain sufficient market liquidity with a smaller percentage of publicly traded shares than a smaller business.
The proposed system divides companies into five tiers, based on their expected market value at the time of listing. Each tier carries a different minimum public float requirement, ranging from 33% for the smallest companies to 12% for the largest.
Specifically, companies valued up to P500 million would need to offer 33% to the public. Those between P500 million and P1 billion would require 25%, with a minimum share value of P165 million. The requirements scale down as company valuations increase.
For companies exceeding P150 billion in market value, the minimum public float would be 12%, representing at least P22.5 billion in shares. This tiered structure is designed to balance investor protection with the practical realities of raising capital.
Once listed, companies will be obligated to maintain the public ownership level corresponding to their initial tier. This ongoing requirement ensures continued market participation and liquidity.
The SEC also outlines a clear process for companies that fall below their required public ownership threshold. They must immediately report the shortfall, submit a recovery plan within 10 days, and have up to a year to restore the minimum float.
Regular monitoring and reporting are crucial under the proposed rules. Companies will be required to submit monthly updates to the SEC, demonstrating their progress toward maintaining the required public ownership levels.
Existing companies that launched their IPOs before the new rules take effect will continue to operate under the previous 20% standard. This provides a transition period and avoids disrupting established market structures.
SEC officials are optimistic that the new framework will be approved and implemented by early next year, potentially unlocking a wave of new listings and investment opportunities in the Philippine stock market.
The goal is to create a more dynamic and accessible market, encouraging more companies to seek public funding and contributing to overall economic growth.
