THE Securities and Exchange Commission (SEC) is requiring publicly-listed companies to increase their minimum public ownership to 20 percent, or double the current requirement.
In an emailed presentation, the commission said significant shareholdings of 10 percent or more of the total issued and outstanding shares of a company “are considered strategic, and, thus, excluded in the public float of the company.”
The minimum public ownership requirement for Philippine-listed companies is currently 10 percent, but the free float of these companies actually average 25 percent.
Public float refers to the regular shares a company has issued and are available for trading.
The SEC cited four advantages of increasing the public ownership.
First, it increases market depth and is essential for sustaining a continuous market for listed shares to provide liquidity. “This attracts good quality and long-term investors to the stock,” the SEC said.
Second, a higher level of liquidity improves market efficiency, reduces volatility and encourages better price discovery.
Third, a large and dispersed shareholding lowers opportunities for collusion or price manipulation and encourages good governance.
Fourth, the larger the public float, the more effective is the instrument of listing as a tool for redistribution of wealth in the country.
Philippine Stock Exchange (PSE) data showed around 39 companies will be affected by the proposed increase.
They will be given until next year to widen the number of shares available to the investing to at least 15 percent of the total outstanding shares.
The SEC said 68 companies, on top of the 39, will be given at least three years, or by 2020, to comply with the new minimum public ownership.
Around P37.23 billion is expected to be generated next year with the 15 percent minimum public ownership.
By 2020, the SEC expects to generate around P112.5 billion in additional market liquidity from companies that will meet the 20 percent requirement.
But if all listed companies heed the required, the SEC sees an additional P130.98 billion in market liquidity.
Companies that are about to meet the minimum public ownership requirement enjoy preferential tax treatment as prescribed by the Bureau of Internal Revenue (BIR) under Revenue Regulations No. 16-2012.
Non-compliant companies must pay 5 to 10 percent tax on net capital gains and the documentary stamp tax.