The Philippine Stock Exchange, Inc. (PSE) is revising its Main and Small, Medium and Emerging (SME) Board initial public offering (IPO) Listing Rules in a bid to attract more companies to list in the local bourse.
“We reviewed our listing rules alongside the listing rules of our peer exchanges. We noted that there are provisions in our rules that can be aligned to what is practiced in the region,” said PSE President and CEO Ramon S. Monzon.
He added that, “There are also rules that can be relaxed so more companies can access the stock market for their capital requirements.”
“When we did this exercise we also had to consider the impact of the pandemic to the economy and the capital market,” Monzon noted.
Under the current rules, a company applying to list in the Main board must satisfy the profit test and market capitalization test and meet shareholders’ equity requirement.
In the proposed revisions, the market capitalization test was removed but the applicant must satisfy both the profit and minimum total stockholders’ equity requirements.
The current profit test considers the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) specifically requiring at least P50 million for the last three years and a minimum EBITDA of P10 million for each of the three years.
The suggested rule amendment on profitability prescribes an aggregate net income of P75 million for the last three financial years and a net income of P50 million for the most recent financial year.
The company must also have at least P500million in stockholders’ equity on its most recent financial year.
For the SME Board, the profitability and operating history are among the criteria that are recommended to be relaxed.
From a purely EBITDA-based screening, the applicant now has the option to satisfy either the EBITDA requirement or the net sales/operating revenue.
The latter will require that the applicant should have a cumulative net sales/operating revenues of at least P150 million for the last three years or such shorter period as the company has been operating and show at least 20 percent average growth rate for net sales/operating revenues over the latest two years.
The Exchange is also proposing that the operating history requirement prior to listing be reduced to at least two years from the current three years.
“While the rule revisions we are recommending are meant to make it easier for companies to go public, the PSE is keeping and will continue to enforce listing provisions pertaining to investor protection and suitability requirements,” Monzon added.
One of the major changes being proposed to the SME listing rules is the adoption of the Sponsor program wherein companies with significant growth potential but are unable to qualify using the new SME Board requirements, may apply for listing through the Sponsor model.
The Sponsor, an investment house which should pass PSE’s accreditation, will be responsible for hand-holding the company from its IPO preparation phase to three years after listing to ensure that the company complies with listing and continuing listing and disclosure rules for all publicly listed companies.
“This big brother model is adopted by various bourses in the region and we think that this will also work in our market,” said Monzon.
He noted that, “There are so many SMEs, even start-ups, with very promising business concepts and models that may still not qualify to list even with our proposed SME Board rule revisions. But this should not deter these companies from tapping the stock market for their funding requirements. With the Sponsor model, we hope to help and support more SMEs grow their businesses.”
For companies planning to do an IPO in the Main or SME Board in 2021 and 2022 but whose operations or businesses were adversely affected by COVID-19, the PSE, on a case-to-case basis, may consider the profitability of the applicant for any two fiscal years in the three most recent fiscal years, excluding the year of the impact.
The PSE shall also determine the suitability of the applicant to be listed with due consideration to the adverse effect of the pandemic and the applicant’s recovery measures.
In this regard, the latest interim financial statements of the applicant, when available, will be considered in the evaluation of the applicant’s prospects of recovery from the pandemic.
“This temporary relief is PSE’s way of supporting government’s initiative to ramp up the economy by assisting companies, including SMEs. We know that businesses need to access capital to revitalize their operations. By easing certain requirements, we hope to make a significant contribution to the country’s economic recovery process,” Monzon said.
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SEC approves P41.55-B Converge IPO
The Securities and Exchange Commission (SEC) has approved the planned P41.55 billion initial public offering of broadband service provider Converge Information and Communications Technology Solutions, Inc.
In its meeting on September 24, the Commission En Banc resolved to render effective the registration statement of Converge for up to 7.53 billion common shares for listing and trading on the Main Board of the Philippine Stock Exchange, subject to the company’s compliance with certain remaining requirements.
The registration statement covers 480.84 million shares for primary offering, 1.02 billion shares for secondary offering and 225.79 million shares for overallotment at a maximum price of P24 apiece.
From the primary offer, Converge expects to raise about P11.07 billion, of which about 90 percent will be used to fund capital expenditures for the purpose of accelerating its nationwide fiber network rollout.
Morgan Stanley Asia (Singapore) Pte. and UBS AG Singapore Branch will serve as joint global coordinators and joint bookrunners for the offer, together with Credit Suisse (Singapore) Limited and Merrill Lynch (Singapore) Pte. Ltd. As international joint bookrunners.
Meanwhile, Converge tapped BPI Capital Corporation as sole local coordinator and joint local underwriter and joint bookrunner with BDO Capital & Investment Corporation.
Asia United Bank Corporation, First Metro Investment Corporation, Maybank ATR Kim Eng Capital Partners, Inc., PNB Capital and Investment Corporation and RCBC Capital Corporation will also act as local participating underwriters.