Record number of IPOs expectedthis year – PSE

MANILA, Philippines — The number of initial public offerings (IPOs) could reach a 26-year high this year as more companies raise capital from the stock market instead of tapping bank loans that are now more expensive, no thanks to the high interest rate regime, the Philippine Stock Exchange (PSE) said.

There have been eight IPOs so far this year, matching the number of maiden offerings for the entire 2021. Th PSE said at least two more companies may list this year in addition to the eight that have made their respective market debuts.

PSE president and CEO Ramon Monzon said while it is far from the record 21 IPOs in 1994, this will put an end to the annual single-digit IPOs since 1997.

“We see companies requiring capital to fund their post-pandemic recovery plans. At this time of high interest rate regime, selling shares to the public is a more viable option than taking out loans,” Monzon said.

The PSE relaxed listing rules last year while the government repealed the IPO tax under Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan II), which have contributed to a faster, more accessible road to IPOs, Monzon said.

In March 2021, the Securities and Exchange Commission (SEC) also approved the Amendments to PSE’s Consolidated Listing and Disclosure Rules. These include a time-bound relief for IPOs filed in 2021 and 2022 – a provision that permits the PSE to consider, on a case-to-case basis, the profitability of the applicant for any two fiscal years in the three most recent fiscal years, excluding the year of the impact of the COVID-19 pandemic.

Under the new rules, the PSE removed the market capitalization test and likewise revised the profit test, such that the applicant-company must show 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.

Under the sponsor model, which the PSE also put in place, the applicant’s suitability for listing will be evaluated in the first instance by a listing sponsor accredited by the PSE.

“The sponsor is expected to thoroughly assess the company’s financial condition, business viability, future prospects and management track record among others,” the PSE said.

If deemed suitable for listing, the sponsor shall endorse the IPO application of the company to the PSE, which patterned the sponsor model from bourses overseas.

Once in effect, PSE expects more SMEs and startup firms to tap the equities market.

“There are several companies that do not qualify to list based solely on the SME Board listing requirements. We want the stock market to be accessible to these businesses and give them equal opportunity to raise capital through equity financing, especially if they are profitable and have rosy growth prospects,” Monzon said.