The Philippine Stock Exchange (PSE) is lobbying to increase the limit on initial public offering (IPO) share allocations to local small investors (LSIs) as part of moves to encourage higher retail investment in the capital markets.
In a circular posted on its website, the PSE calls for comments and suggestions from concerned and interested parties regarding its proposed amendment to Article III, part F, Section 3 of the consolidated listing and disclosure rules, specifically seeking to raise allocations to LSIs to P100,000 worth of IPO shares from the current P25,000.
“Over time, the offering size of IPOs has grown on average and the number of IPOs beyond P1 billion has been increasing. As the size of the offerings increase, the required number of investors for the entire 10 percent allocation to be fully taken up also increases,” the PSE said.
According to current listing rules, every IPO is required to set aside 10 percent of the offer shares for LSI subscriptions.
The hike to P100,000 from P25,000 is expected “to help facilitate greater participation and subscription to the local small investor allocation.”
“The exchange believes that the maximum allowable investment under the LSI program needs to be updated as well, to be indexed against the increasing offer size and the investing capacity of investors. The exchange proposes to allow a maximum investment per LSI that is applicable to the offer size. By indexing the maximum to the offer size, we hope to increase the total take-up of the LSI allocation,” the PSE said.
The LSI program under the listing rules was introduced as a mechanism to allow and give a chance to small investors to participate in IPOs.
The PSE said it is open for submissions of consultation papers to give concerned stakeholders an opportunity to air their comments and suggested revisions to the proposed amendment of listing rules regarding the LSI program and its allocation limit.
Deadline for submission of comments is on December 29, 2016.
The first IPO that employed a P100,000 allocation cap for LSIs was Pilipinas Shell Petroleum Corp. on November 3.