THE Securities and Exchange Commission is planning to impose the 20 percent minimum public ownership on companies that will conduct initial public offerings (IPOs) starting later this month.
“Our thinking is we will go forward with the IPOs first to require the [20 percent] minimum float. We’re still looking at how to address the existing ones,” SEC Commissioner Ephryo Luis Amatong told reporters Monday on the sidelines of the annual general membership meeting of the Shareholders Association of the Philippines in Makati City.
The public float of a company refers to the portion of the issued and outstanding shares that are freely available and tradable in the market and are non-strategic in nature, or those not meant for the purpose of gaining substantial influence on how the company is being managed.
“The real issue is the ones who are dormant because, aside from the fact that we only have 256 [firms], there are many companies that are actually not operating, so how will you increase the capital float for those that are non-operating?” Amatong asked.
He said lawyers representing the dormant firms have appeared before the Commission to appeal the plan and explain their side.
“On the IPO front, from the people we’ve talked to, 20 percent is not a problem,” he said.
The SEC has yet to issue a new ruling on the minimum public ownership requirements for listed companies but earlier this year it announced a plan to raise the minimum to 20 percent starting July 2017.
Under the original timetable, companies that are already listed but are below the 20 percent threshold will be given three years to comply. They will be required to increase their public float to at least 15 percent on or before the end of 2018, and then to at least 20 percent on or before the end of 2020.
The SEC 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 of listed companies is currently 10 percent, while the current average free float requirement is 25 percent.
The SEC cited several advantages for the move, noting it would improve market depth and increase the level of liquidity, which would improve market efficiency, reduce volatility and encourage better price discovery.
It would also result in a large and dispersed shareholding, lowering opportunities for collusion or price manipulation and encouraging good governance. Moreover, it said a larger public float makes listing a more effective instrument for the redistribution of wealth in the country.