The Philippine Stock Exchange (PSE) is working to encourage more companies to go public through a stepped-up marketing campaign that aims to inform small and medium enterprises (SMEs) of its relaxed listing rules for initial public offerings (IPOs) and the growth opportunities available to them by joining the local bourse.

In a report to the Capital Market Development Council (CMDC), PSE President-CEO Ramon Monzon said online tools to assess the readiness for the Initial Public Offering (IPO) and listing of firms have also been posted by the PSE on its website to assist investment houses in gauging the level of preparedness for the listing of companies.

Monzon said the PSE has also partnered with several business organizations and government agencies to boost its marketing campaign on the amended PSE listing rules and broaden the pool of listing candidates.

The listing framework was amended by the PSE and approved by the Securities and Exchange Commission (SEC) earlier this year, to make these relaxed rules at par with the corporate regulations of the other ASEAN-6 economies (Indonesia, Malaysia, Singapore, Thailand and Vietnam) in the Association of Southeast Asian Nations.

Monzon said the campaign will include a virtual Roundtable Discussion on IPO Listing set on May 25.

The forum, which will have Finance Secretary Carlos Dominguez III among the key speakers, will discuss the amended listing rules of the Main and Small, Medium and Emerging Boards of the PSE, as well as insights on the advantages and expansion opportunities for SMEs in the stock market, Monzon said during a recent CMDC meeting.

Co-chaired by Dominguez; lawyer Benedicta Du-Baladad, a former president of the Financial Executives Institute of the Philippines (FINEX); and SEC chairman Emilio Aquino, the CMDC is a coordinating body tasked to facilitate the development of the Philippine capital market.

Dominguez told Monzon to provide the CMDC a progress report that includes the actual number of SMEs listing in the PSE board.

The PSE’s marketing campaign kicked off last April 7 with the conduct of an online information session on the amended listing rules and introduction to the sponsor-driven listings on the Small, Medium and Emerging Board.

Under the sponsor-driven model, the listing application for the company that is unable to comply with the profitability or operating history requirement will be done by a PSE-accredited sponsor, which must be a licensed investment house.

Monzon said around 217 participants from various investment houses, law firms and other organizations took part in the April 7 session.

For the roundtable discussion on May 25, Monzon said the PSE will invite members of the Investment House Association of the Philippines (IHAP), advisory firms, institutional clients and executives of its top target companies, and representatives from the government.

Monzon said the PSE has also distributed electronically several easy-to-read IPO listing reference materials to key stakeholders and listing applicants to widen the reach of the marketing campaign.

Long before the SEC approval of the amended listing rules, Monzon said the PSE has already been coordinating with the Department of Trade and Industry (DTI) and Board of Investments (BOI) in identifying companies ready to undertake their IPOs.

With technical and material assistance from the United States Agency for International Development (USAID), the PSE, FINEX and DTI have also teamed up to provide technical inputs and support in designing a capacity-building program for SMEs, and startups, Monzon said.

The amended PSE listing rules include the presentation of the sponsor-driven model for the Small, Medium and Emerging Board; removal of the requirement of positive Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and its replacement with the Cumulative Net Sales or Operating Revenues as a metric for the Small Medium and Emerging Board; shortening of the required operating history from 3 to 2 years; and removal of the P100-million minimum authorized capital stock requirement.

Listing applicants, however, must have a Minimum Stockholder’s Equity of at least P75 million in the past 3 fiscal years and a net income of at least P50 million for the fiscal year immediately preceding the filing of the application, among other requirements under the amended rules.

The amended rules also grant time-bound relief for IPO applicants planning to list in the boards but were hit by the impact of the COVID-19 pandemic.

As an example, for an IPO application filed this 2021 by a company demonstrating the negative impact of COVID-19 on its financial condition and results of operations in 2020, the PSE would just consider its 2018 and 2019 financial performance.

Despite having one of Asia’s oldest stock exchanges and being at par with other ASEAN economies in terms of corporate governance, the Philippine stock market remains small compared to its Southeast Asian neighbors, with only 268 publicly traded firms in the PSE, compared to the 927 in Bursa Malaysia and the 367 in the Hanoi Stock Exchange as of 2019, based on data from the World Federation of Exchanges.

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