ALBAY Rep. Raymond Adrian E. Salceda said the Philippine Stock Exchange’s (PSE) rule requiring companies to offer at least P1 billion or 20% of their market capitalization when listing preferred shares has made it difficult for subsidiaries of listed companies to tap the stock market.
“The current rule allows any SEC-registered company to do an IPO (initial public offering) of preferred shares, but with very specific conditions: P1-billion offering or 20% of the market cap,” Mr. Salceda said.
“There are a few construction companies and some small energy companies that are interested in doing this route. But it involves all the rules of an IPO.”
Under the rules introduced by the PSE in 2022, companies may list preferred shares without listing common shares, provided they offer at least P1 billion or 20% of market capitalization and have at least 1,000 stockholders.
“Also, the rule is specifically 20% of market cap or P1 billion, whichever is higher,” Mr. Salceda said. “The 20% rule is too high for a lot of subsidiaries of already-listed companies.”
“In practice, the workaround has been for the listed mother company to just list prefs on their own and distribute proceeds to subsidiaries,” he said.
“The workaround has limits though because most of the time, the needs of just one subsidiary are also too small for sprawling conglomerates to bother listing prefs for them.”
“There is a big listed company with a foreign partner in one of its subsidiaries that explored prefs to finance its dams and wind projects, but that idea was shelved,” he added.
Mr. Salceda said the resolution he filed aims to make such listings easier.
“I wrote this resolution because I felt that this clarification is an extremely low-hanging fruit, with very little risk to both the system and small investors,” he said.
“Because the subsidiary is ‘chaperoned’ by the listed parent company, then the rules should also indicate that it is the parent that is answerable to the small investors,” he added.
“Just as the subsidiary’s disclosures will also be made through the parent.”
The resolution, initially assigned to the Committee on Trade and Industry, has been pending with the Committee on Banks and Financial Intermediaries since Oct. 8.
It also calls for safeguards such as consolidated group reporting and transparent disclosures of related-party transactions. — Alexandria Grace C. Magno
