Market sentiment is showing certain signs of improvement, an emerging consensus among the biggest players.

Amidst growing geopolitical tensions, the outlook remains positive, with the domestic bourse gradually becoming “more conducive” to initial public offerings (IPOs). Mobile wallet service GCash and Maynilad Water Services Inc. are reportedly on the pipeline, moving forward.

The latest I’ve heard along the market corridors is that the management of GCash is seriously considering the possibility of seeking regulatory relief from the Philippines Stock Exchange (PSE) and the Securities and Exchange Commission (SEC) to relax the minimum public float to 10 percent.

Gathered from a top but discreet source familiar with the much-awaited GCash IPO, the management of the e-wallet market leader plans to request an “exemptive relief” due to the “absorptive capacity of the market.”

You may ask, what exactly is the market's absorptive capacity under the current conditions? “It’s fragile,” was the curt response of one of my favorite market professors, Andro Leo “Andoy” Beltran, First Metro Securities Brokerage Vice President and Head of Business Development & Market Education Department.

Prof. Andoy explained that despite signs of recovery, the country’s stock market’s absorptive capacity for large IPOs like GCash “remains constrained due to fragile investor sentiment and limited liquidity.” The postponement of Maynilad’s IPO to sometime in October this year “underscores the market’s cautious stance.”

On the matter of GCash's impending request, the PSE already reduced the minimum public float to 15 percent from the standard 20 percent in March to make it easier for companies with large offerings to proceed with their IPO.

Back in 2020, both the PSE and the SEC began requiring a 20 percent to 33 percent minimum public float for IPOs and backdoor listings. Prior to Aug. 3, 2020, the minimum was 10 percent.

However, there’s a caveat! The relaxation is allowed on the condition that the company must conduct a follow-on offer or a private placement within the next two to three years to meet the 20 percent requirement.

“This transitional scheme is called PSE LANE (Listing Assistance for New Entrants),” explained Prof. Andoy. Furthermore, the relaxation is permitted for companies that want to offer ₱5 billion or more, less than the 20 percent public float requirement for IPOs.

I heard from my market sources privy to the GCash float that this particular provision in the PSE relaxation is exactly the focus of the e-wallet’s management for its planned regulatory relief request. Eagle Equities President Joey Roxas fully agrees that the PSE could “waive” the regulatory rule, provided it is “reasonable.”

Yes Virginia, it is a numbers game. An arithmetic-mathematical issue that comes into play. From what I’ve gathered along the market corridors, GCash has “noted a target valuation of $8 billion for the IPO.”

“If GCash (through Mynt) goes public and offers the mandated 20 percent of its equity, estimates peg that slice at anywhere between ₱50 billion and ₱90 billion, depending on valuation,” pointed out my source, who is deep into bourse trading.

A subsidiary of Globe Telecom, Mynt is the holding company of GCash that is owned by Globe Fintech Innovations, Inc. and operated by its wholly owned subsidiary, G-Xchange, Inc.

All things considered, Prof. Andoy admitted GCash’s IPO is considerably massive by Philippine standards as it could exceed the biggest IPOs in local history to date: Monde Nissin in 2021 at ₱55.89 billion and Converge ICT Solutions at ₱29 billion. Whew! That is huge.

Newly minted SEC Chairman Francis Lim is receptive to granting regulatory relief. “I am open to the idea. Depending on the justification, the en banc may approve or deny the request,” he said.

Additionally, there has to be an endorsement from the PSE. Simply put, GCash management must first submit its appeal for regulatory relief to the PSE before the SEC acts on the request. Exemptive relief is allowed under the Securities Regulation Code.

Let's see how this will play out.