PSE wants to greatly reduce retail’s access to IPO shares through the PSE EASy program
Under the current Philippine Stock Exchange [PSE 215.00 0.37%] EASy rules, the PSE mandates that every IPO set aside 10% of its total offer for local small investors (LSIs) to purchase through the PSE EASy program, which was created by the PSE to help democratize access to IPOs.
Under the PSE’s new proposed rules, allocations to the PSE EASy program are permitted to be as low as 5% of the total issuance, and may be up to 10% depending on the size of the IPO.
There’s a clawback rule that allows companies to increase the PSE EASy allocation (still subject to that overall 10% cap) if the PSE EASy allocation is oversubscribed by 5 times or more.
The rule changes would also make follow-on offerings eligible for the PSE EASy program.
There are also a few proposed changes that will strengthen lock-up rules for follow-on offerings and backdoor listings.
MB BOTTOM-LINE
I think it’s great to expand the PSE EASy program to include follow-on offerings, and to try and protect retail investors through strengthened lock-up rules, but to reduce the PSE EASy allocation mandate is (I think) short-sighted.
I think that it’s also more than a little disingenuous for the PSE to support the move by referencing the low retail takeup over the past two years (apparently only 14% of the PSE EASy allocation was purchased if you added it all up).
The “rise” of retail is a relatively new phenomenon, and it is unquestionable that retail interest in IPOs is building.
We only have to look at the fiasco surrounding the AllDay Marts [ALLDY 0.61 unch] IPO, and all of the refunds and confusion that were caused when retail buyers flooded the PSE EASy platform with orders. That was just a few months ago.
The demand from retail exposed some weaknesses in the PSE EASy program, and I’m afraid that instead of trying to fix the issues in the best interests of the retail investor, the PSE has decided that it would just be easier to limit access on the front-end rather than deal with the actual problems on the back-end.
It’s very frustrating to see the PSE make these plans, just when it was becoming clear that PSE EASy was the best way for regular investors to get allocations on IPOs. The changes are only proposed, though, so I will follow along as things change with great interest.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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