LISTED companies may raise around P37.23 billion from the market when the Securities and Exchange Commission (SEC) starts its first round of minimum public-float hike to 15 percent from the current 10 percent by the end of 2018.
According to assumptions by the SEC, around P112.5 billion will need to be raised by the firms when the minimum public float will be increased to 20 percent by end of 2020.
SEC data showed with its current liquidity, the market can more than accommodate such amount of fund raising. It based its assumptions on the number of the listed firms as of end-March.
Last year P176.5 billion was raised from the market through initial public offerings (IPOs). Last year’s IPO figures, however, were lower than the P184.6 billion raised in 2015, but higher compared with the P153 billion raised in 2014.
SEC Commissioner Teresita Herbosa said if the country will raise the public float of listed companies, it will come nearer to the regional average minimum public offering (MPO) of 25 percent.
The government, however, expects the industry to ask for the extension of the implementation of the increased public float rather than questioning the proposed rules itself.
“It’s not about the [increase in] MPO itself, but on the timeframe of the implementation. The industry players themselves are asking for this,” SEC director for Markets and Securities Regulation Department Vicente Graciano Felizmenio Jr. said at the sidelines of the SEC’s briefing on its proposal.
The SEC is increasing the minimum public float of listed firms to 15 percent by the end of next year and to 20 percent by end-2020.
In its proposed SEC Memorandum Circular, which will take effect after publication, starting July, all firms filing for their IPO should have to float at least 20 percent of its issued and outstanding shares.
Public float of a company refers to the portion of the issued and outstanding shares freely available and tradable in the market and are nonstrategic in nature. Significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered strategic and, thus, excluded in the public float of the company.
The proposed rules are still subject to public comments until today, June 15.
Noncompliance of the minimum public-ownership requirements may result to publicly listed companies being subjected to the administrative sanctions provided under Section 54 of the Securities Regulation Code. They may also be subject to higher tax rate.
Under Bureau of Internal Revenue Revenue Regulations 16-2012, all publicly listed companies are required to maintain a minimum public ownership as prescribed by the SEC to enjoy preferential tax treatment.
The sale, barter, exchange or other disposition of shares of stocks of publicly listed companies that meet the minimum public float is subject to the stock-transaction tax of one-half of 1 percent of the gross selling price.
If it fails to meet the set minimum public float, it will be subject to a final tax of 5 percent or 10 percent on the net capital gains and documentary stamp tax.
The SEC said the move to raise the minimum public float will help increase market depth, and is essential for sustaining a continuous market for listed securities to provide liquidity. This attracts good-quality and long-term investors to the stock.
“A large and dispersed shareholding lowers the opportunities for collusive market action or price manipulation and encourages good governance. The larger the public float, the more effective is the instrument of listing as a tool for redistribution of wealth in the country,” the SEC said.
PSE data showed that 39 listed companies will be affected if the minimum public float is increased to 15 percent by next year, and 68 companies will be affected if it is further increased to 20 percent.
Image credits: AP/Aaron Favila