Veteran stockbroker Vivian Yuchengco said the decision by the Securities and Exchange Commission to double the minimum public ownership requirement for all listed companies to 20 percent by 2020 could discourage new initial public offerings.
Yuchengco, a director of the Philippine Stock Exchange, said in a chance interview companies planning to list with the stock exchange might be turned off by the new requirement.
“I think SEC chairman Teresita Herbosa has to review what she is doing because worldwide, [minimum public float requirement] it’s only 10 percent,” Yuchengco said.
Yuchengco said the SEC’s move would result in reduced trading volume in the stock exchange instead of improving the liquidity in the market.
“What we need here is not liquidity. What we need is for the government to be more capital markets friendly, not always harassing the stock exchange,” Yuchengco said.
PSE chairman Jose Pardo said the doubling of the minimum public ownership requirement to 20 percent “is a big leap”.
Pardo said while the timing was a debatable issue, the SEC needed to consider the current market side of the exchange.
“The timing is always a debatable issue and we could are argue for either side. There are pros and cons. But we still have to increase the size of the market. So it is a big leap from 10 to 20,” Pardo said.
The SEC issued last week the draft rules that would gradually increase the public float of all listed firms to 15 percent by 2018 and eventually to 20 percent by 2020.
The SEC also wanted upcoming IPOs to have a public float of 20 percent. It said the move aimed to promote the development of the Philippine capital market and encourage the widest participation of ownership in enterprises.
The regulator said the higher public ownership would increase market depth and help listed companies attract good-quality and long-term investors.
The increased in liquidity also improves market efficiency, reduces volatility and helps in better price discovery, the SEC said.
Companies found non-compliant may also be subject to a higher tax rate.
Under Bureau of Internal Revenue’s Revenue Regulation No. 16-2012, all publicly listed companies are required to maintain a minimum public ownership as prescribed by the SEC to enjoy preferential tax treatment.
Among the listed companies whose public ownership is currently below 20 percent are San Miguel Corp., San Miguel Purefoods Co. Inc., Filinvest Development Corp., Eagle Cement Corp., Pilipinas Shell Petroleum Corp. and PAL Holdings Inc.