by James A. Loyola, Manila Bulletin
The Philippine Stock Exchange expects the number of its initial public offerings in 2022 to reach a 26-year high of 11 companies as it has three more maiden offerings in its pipeline for the year.
Year-to-date, the PSE has had eight IPOs, matching the number of IPOs for the entire 2021. While it is far from the PSE’s record of 21 IPOs in 1994 (16 in 1995 and 13 in 1996), this will put an end to the single-digit IPOs since 1997.
PSE President and CEO Ramon S. Monzon attributed the growth in the number of IPOs for the year to a confluence of several factors.
“We see companies requiring capital to fund their post-pandemic recovery plans. At this time of high interest rate regime, selling shares to the public is a more viable option than taking out loans,” he said.
Monzon noted that, “It helps that we relaxed our listing rules last year and government repealed the IPO tax under Republic Act No. 11494 also known as the Bayanihan to Recover as One Act or Bayanihan II.”
The Amended Listing Rules of the PSE and the Bayanihan II IPO tax repeal have contributed to a faster, more accessible road to IPOs.
In March 2021, the Securities and Exchange Commission (SEC) approved the Amendments to PSE’s Consolidated Listing and Disclosure Rules which included time-bound relief for IPOs filed in 2021 and 2022.
This provision permits the PSE to consider, on a case-to-case basis, the profitability of the applicant for any two fiscal years in the three most recent fiscal years, excluding the year of the impact of the COVID-19 pandemic.
Specific requirements for Main and Small, Medium and Emerging (SME) Board Listing were also introduced. For the Main Board, the PSE previously required that the profit test, market capitalization test and shareholders’ equity requirements should be satisfied.
Under the new rules, the market capitalization test was removed but the two other requirements must be met by the IPO applicant.
The profit test was likewise revised such that the applicant-company must show an aggregate net income of P75 million for the last three financial years and a net income of P50 million for the most recent financial year.
In the past, the profit test used the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) specifically requiring at least P50 million for the last three years and a minimum EBITDA of P10 million for each of the three years as gauge.
For the SME Board, from a purely EBITDA-based screening, the applicant now has the option to satisfy either the EBITDA requirement or the net sales/operating revenue.
The latter requires applicant-companies to have a cumulative net sales/operating revenues of at least P150 million for the last three years or such shorter period as the company has been operating and show at least 20 percent average growth rate for net sales/operating revenues over the latest two years.
The Amended Listing Rules also contain Sponsor Model provisions for listing applicants in the SME Board under which the applicant’s suitability for listing will be evaluated in the first instance by a listing Sponsor accredited by the PSE.
“There are several companies that do not qualify to list based solely on the SME Board listing requirements. We want the stock market to be accessible to these businesses and give them equal opportunity to raise capital through equity financing, especially if they are profitable and have rosy growth prospects,” said Monzon.
To further assist potential listing applicants in their future IPO journey, the PSE is hosting the Road to IPO 2022 on September 15.
The virtual session aims to help business owners understand the strategic value of becoming a publicly listed company (PLC) and obtain firsthand information on how to prepare for a maiden share offering from members of an IPO deal team.
Te one-day event will showcase three main topics: “What Lies Ahead for the IPO Market?”, “IPO as a Key Strategic Initiative,” and “IPO Readiness Tips.”
“e want this Road to IPO activity to dispel the notion that an IPO is a daunting undertaking. Through this forum, we want to demystify the IPO process and simplify what is seemingly technical about going public with the help of speakers that have conducted their own IPOs and those who are tapped by companies to help them in their IPO journey,” Monzon explained.
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