THE number of initial public offerings (IPOs) this year is the result of listing rules relaxed last year and the repeal of the IPO tax under a pandemic response law , according to the Philippine Stock Exchange (PSE).
“It helps that we relaxed our listing rules last year and the government repealed the IPO tax under Republic Act No. 11494, also known as Bayanihan to recover as a single act or Bayanihan II,” said PSE President and CEO Ramon S. Monzon. in a statement Friday.
Under Bayanihan II, Section 127(B) of the National Internal Revenue Code of 1997, which required a tax on the safe deposit, barter or exchange of shares listed and traded through the IPO on the basis of the gross selling price or the gross monetary value of the shares of shares sold, has been repealed.
Changes to PSE’s consolidated listing and disclosure rules were approved by the Securities and Exchange Commission (SEC) in March last year.
One is the inclusion of time-limited relief for IPOs filed in 2021 and 2022, which allows the PSE to review the applicant’s profitability for two fiscal years in the three fiscal years. most recent, excluding years that have been affected by the pandemic.
The market capitalization test has been removed from the main board registration requirements, and the profit test has been revised to show an aggregate net income of 75 million pula for the last three years and a net income of 50 million pula in the most recent financial year.
The profit test used to have the requirement of 50 million pesos for the last three years and a minimum profit before interest, tax, depreciation and amortization (EBITDA) of 10 million pesos for each of the three years as gauge.
For small, medium and emerging (SME) boards, candidates now have the option of meeting either the EBITDA requirement or the net sales or operating revenue requirement.
Under the amended rules, applicants must have accumulated net sales or operating income of at least 150 million pesos over the past three years.
PSE also shortened the operating background requirement for SME board candidates to two years from the previous three-year requirement.
Other amendments to the PSE listing rules include removing the minimum market capitalization of 500 million pesos and imposing a minimum equity of 500 million pesos as a measure of the financial status of major board candidates. administration.
Candidates for the board of directors of SMEs are no longer required to have a positive EBITDA in the last two or three financial years, preceding the candidacy, and to have a minimum authorized share capital of 100 million pesos.
PES has also introduced a sponsor model provision for the registration of SME board candidates which allows PES-accredited sponsors to endorse candidates who have not qualified on the basis of the registration requirements alone.
“There are several companies that are not eligible for the list solely on the basis of SME Council registration requirements. We want the stock market to be accessible to these companies and give them an equal opportunity to raise capital through equity financing, especially if they are profitable and have good growth prospects,” Monzon said.
PSE expects at least three more IPOs in the second half, bringing the number of IPOs this year to a 26-year high.
“We are seeing businesses needing capital to fund their post-pandemic recovery plans. In this time of high interest rate regime, selling shares to the public is a more viable option than taking out debt,” Monzon said.
Year-to-date, PES has had eight IPOs, the total number of IPOs for all of 2021.
“Although it is far from the PSE record of 21 IPOs, this will end single-digit IPOs since 1997,” PSE said.
The amount of capital raised from the sale of primary and secondary shares in the first half of the year reached 61.92 billion pesos, down 49.4% year-on-year compared to the fundraising amount of 122.46 billion pesos in the same period last year. .
Analysts said continued market volatility due to the Russian-Ukrainian conflict that has driven global commodity prices and inflation higher could further dampen the IPO in the second half of the year.
“Increased market volatility due to the Russian-Ukrainian conflict since February 24 [t]This has led to higher global commodity prices and inflation, as well as more aggressive Fed rate hikes or monetary tightening to quell high inflation, which could lead to downside risks. economy, even recession in the United States, [t]this could be a drag on IPOs and other equity sales in less favorable market conditions,” said chief economist of Rizal Commercial Banking Corp. Michael L. Ricafort in a text message.
Toby Allan C. Arce, head of sales at Globalinks Securities and Stocks, Inc., pointed out that there is still a lot of uncertainty that continues to add pressure this year.
“Companies need to be properly prepared and have a shrewd strategy in place if they are considering an IPO. They must be ready to take advantage whenever a market opening occurs,” Arce said in a Viber message.
Mr. Ricafort said that as the economy reopens to greater normality, it “will create greater certainty about new investments and expansion plans, as well as greater determination to raise capital for fund them”.
PSE will host Road to IPO 2022 on September 15 to help business owners appreciate the value of becoming a publicly traded company.
“We want this Road to IPO activity to dispel the idea that an IPO is a daunting undertaking. Through this forum, we want to demystify the IPO process and simplify what is seemingly technical about the IPO with the help of speakers who have conducted their own IPOs and those who are sought after by companies to help them on their IPO journey,” said Monzon. Explain.
The Road to IPO is a key initiative of the PES in partnership with the SEC and the Department of Trade and Industry.
Companies interested in participating in the event can register for free at https://bit.ly/TheRoadtoIPO2022. — Justine Irish D. Tabile