THE Philippine Stock Exchange Inc. said it expects activity in its local small investors (LSI) program to be more brisk this year.
“The active participation of local retail investors will likely continue to next year especially as we expect the upcoming IPOs [initial public offering] to attract new investors,” PSE President and CEO Ramon S. Monzon Monzon said. “While this is a much welcome development, we also hope to see the gradual return of foreign funds to the Philippine stock market.”
The market saw a surge in retail investor participation from 27 percent in 2020 and 18 percent in 2019 to 31 percent last year. According to the current rule, each IPO must set aside at least 10 percent of the entire offer to LSIs.
The PSE saw a surge in participation from retail investors last November during the offer process of the Villar-led AllDay Marts Inc., which operates the AllDay Supermarket.
Despite the recent interest, the PSE still seeks to change its current ruling on LSIs as its study showed that in the IPOs conducted over the last two years, the total LSI take-up, in terms of value, was only 14.45 percent of the 10 percent LSI allocation.
The PSE defines an LSI as an investor who is willing to subscribe to a minimum board lot and whose subscription doesn’t exceed P100,000 ($1,955.78 at January 1 exchange rates).
“In IPOs where the offer size is big and a significant number of investors is required for a full take- up of the LSI tranche, a large portion of the LSI shares may end up being unsubscribed and taken up by the underwriter, if the underwriter is not able to immediately place the unsubscribed shares to other investors during the offer period,” a PSE document reads.
“Aside from the financial impact on the underwriter, such a situation may also have an adverse effect on the stock because the disposition by the underwriter of a large number of offer shares post-IPO may cause the stock price to decline. On the other hand, retention by the underwriter of a big block of IPO shares may negatively impact the liquidity of the stock,” it said.
The PSE is proposing to adjust the LSI allocation to not less than 5 percent but not more than 10 percent of the entire offer, depending on the size of the IPO. The “claw back” mechanism, which allows an additional 5-percent increase to the initial allocation for the LSI tranche when the total LSI demand is five times or more than the initial allocation will be retained.
The PSE is also proposing to increase the maximum subscription amount of LSI of P100,000, subject to the approval of the Securities and Exchange Commission, for offer sizes beyond P5 billion.
The PSE, meanwhile, has set a new record for capital raised in the stock market at P234.48 billion in 2021, breaking the previous high of P228.33 billion in 2012, on the back of the biggest IPO to-date and four real estate investment trust listings.
For the year, the PSE had eight IPOs, 11 follow-on offerings, four stock rights offerings and seven private placements.
“We are pleased that more companies chose to raise funds through the PSE,” Monzon said. “Their confidence in the stock market made it possible for us to achieve this record capital raising number.”
The PSE will open 2022 with the back-to-back IPO of a small property developer Haus Talk Inc. and restaurant operator Figaro Coffee Group Inc. The PSE is also hosting its first-ever 2-day Investment Expo on January 29.