Tiered IPO rules may draw more tech stocks

A PROPOSAL seeking a tiered minimum public ownership framework could encourage more technology companies to pursue an initial public offering (IPO), analysts said.

“The Securities and Exchange Commission’s (SEC) draft proposal for a tiered minimum public ownership framework marks a meaningful shift away from a one-size-fits-all IPO rule toward a more flexible, size-based approach that better reflects the realities of today’s capital market,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

Last month, the SEC released a draft memorandum circular proposing a tiered minimum public ownership framework for companies seeking to list shares on the stock exchange.

The draft circular aims to establish varying public ownership requirements based on the size of the issuer, as well as factors such as market liquidity, investor protection, capital formation and market competitiveness.

Mr. Arce said the proposed framework aligns with the Department of Information and Communications Technology’s (DICT) push to encourage more technology companies to list locally.

The ICT secretary has said Globe Fintech Innovations, Inc. (Mynt), the parent of GCash, and Grab Philippines have strong potential to go public. However, both firms have said an IPO is not a priority for them.

Under the draft circular, companies planning to go public will be assigned to one of five tiers based on their expected market value at listing.

Tier I companies with a market value of up to P500 million must maintain a minimum initial public float of 33%. Tier II companies valued between P500 million and P1 billion must have at least a 25% public float, with a minimum value of P165 million.

Tier III companies with market values ranging from P1 billion to P50 billion will need to maintain at least a 20% public float worth at least P250 million. Tier IV firms valued between P50 billion and P150 billion must have a minimum public float of 15%, equivalent to at least P10 billion. 

Tier V companies with a market value exceeding P150 billion must maintain a public float of at least 12%, or a minimum of P22.5 billion.

After listing, companies must maintain a fixed minimum level of public ownership corresponding to their assigned IPO tier.

DICT Secretary Henry Rhoel R. Aguda earlier said he is pushing for more technology firms to go public to help deepen the country’s capital market.

“On the positive side, marquee tech IPOs would deepen the market, widen the investor base and create clear exit paths for venture capital and private equity backers,” Mr. Arce said.

But Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said technology firms are waiting for more favorable market conditions before proceeding with IPO plans.

Mr. Arce added that limited market depth and liquidity, as well as investor appetite for tech stocks, could discourage listings. He also cited macroeconomic and valuation concerns that could weigh on post-listing performance. — Beatriz Marie D. Cruz