SEC to implement minimum public float of 15%

MANILA, Philippines - Companies seeking to list in the Philippine Stock Exchange (PSE) this year may have to start complying with a minimum public float of 15 percent instead of just 10 percent as the Securities and Exchange Commission (SEC) starts implementing a new rule on higher float, its top official said.

In an interview, SEC chairperson Teresita Herbosa said the corporate regulator would soon issue a circular to implement a gradual increase in the required minimum public float for companies intending to list in the stock market.

“We will do it gradually so those that will do an IPO this year, it is likely they will do 15 percent. They should be very committed,” Herbosa said.

The public float refers to the portion of share of a corporation that are owned by public investors. 

The SEC’s Market and Securities Regulation Department has recommended a gradual increase in the minimum requirement until it reaches 25 percent.

Thus, Herbosa said, the SEC would first increase it five percent to 15 percent and then eventually to 25 percent.

But at the same time, Herbosa said the regulator would also look into the impact on the market of the US Federal Reserve’s move to raise rates by 25 basis points last year.

Share prices at the local stock market are currently on the downtrend amid global uncertainties that have prompted foreign fund managers to pull out from emerging economies such as the Philippines.

At the end of the trading session last year, the benchmark Philippine Stock Exchange index (PSEi) closed at 6,952.08, down 3.85 percent from 7,230.57 in 2014.

Herbosa said the goal is to bring the local capital markets at par with other Asean countries such as Hong Kong, Thailand and Singapore, which impose minimum public float requirements of between 10 and 25 percent.

The PSE started implementing the 10 percent minimum public ownership requirement in 2011 to increase public participation in the local capital markets and deepen the capital market.

A higher public float would further deepen the country’s capital market and encourage small investors to put their hard earned money in the stock market instead of putting this in get-rich-quick investment scams that are currently proliferating in the country.

In 2013, the PSE reported the average free float level in the local stock market increased to 33.4 percent, following the imposition of the 10-percent public float requirement in 2011.

“We want to really preserve the capital markets. People might be left investing their money in scams because they also don’t trust the capital markets so we have to offer a very good alternative. People should have options,” Herbosa said.

She said that companies intending to go public should show their commitment to investors.

“If you are going to raise money from the public you should be committed to make your company be owned by more people,” she said. 

At least two construction giants – D.M. Wenceslao and Datem Inc. are planning to list this year after putting off their planned market debuts last year. 

Other companies intending to list in the local bourse this year are technology company Pointwest, brokerage firm Philstocks Financial and oil giant Pilipinas Shell Petroleum Corp.