Philippines mulls easing IPO rules as GCash lines up for listing
The Philippines has become the latest Asian country to offer more flexible listing requirements, as it prepares for its largest IPO.
On Wednesday, the Securities and Exchange Commission indicated it was open to lowering the 20% free-float requirement for IPOs on the Philippine Stock Exchange to 15% to ease the pressure on large issuers, provided the higher level is attained within two years of listing.
Mcjill Bryant Fernandez, commissioner at the SEC, said the regulator was firm about the 20% free-float but is "open to applications for exemptive relief".
Ramon Monzon, president and CEO of the PSE, said on the sidelines of the exchange operator's InvestPH conference that the SEC had agreed to relax the initial 20% requirement for companies offering at least Ps5bn (US$87m) of shares, according to comments reported by local media.
The SEC's intervention comes after fintech company GCash requested a lower free-float for its planned IPO. GCash is a mobile payments app used to transfer money, pay bills, invest or buy insurance, and shop online.
GCash's parent company is Globe Fintech Innovations, also known as Mynt. Ant Group, Mitsubishi UFJ Financial Group and Philippines conglomerate Ayala are also shareholders.
According to media reports, the company is seeking a valuation of at least US$8bn so that a 20% free-float would mean it had to sell US$1.6bn of shares in the IPO. A 15% free-float requirement would cut that to US$1.2bn.
Food company Monde Nissin's Ps48.6bn (US$849m at the current exchange rate) IPO in 2021 was the country's largest float to date. Since then the Philippines has only seen IPOs below US$200m in size and issuers are not confident that the market has the capacity to absorb such a large issue. Last year's largest IPOs came from energy developer and operator Citicore Renewable Energy (Ps6.93bn) and gold producer OceanaGold Philippines (Ps6.1bn).
"The Philippines needs more consumer and technology listings to make it attractive to both local and foreign investors," a Singapore-based ECM banker said. "A successful listing by GCash can bring life into this rather illiquid market."
A free-float of at least 20% is a requirement for inclusion in the PSE index.
JP Morgan, Morgan Stanley, UBS, HSBC and Jefferies are working on the GCash IPO, which was initially expected to be in a US$1bn–$1.5bn range. The issue is being planned for the second half.
Asian precedents
Asian stock exchanges have tweaked rules to facilitate large IPOs in the past. In 2022, the Indonesia Stock Exchange allowed multiple voting rights for the first time in GoTo Gojek Tokopedia's Rp15.8trn IPO (US$959m at the current exchange rate) and also allowed the ride hailing and e-commerce app to sell just 3.9% of its capital as against the usual 7.5%.
In the same year, the Securities and Exchange Board of India allowed the government to sell a 3.5% stake in Life Insurance Corp of India's Rs206bn (US$2.39bn at the current exchange rate) float, much lower than the usual 10% IPO requirement. Sebi initially gave the government two years to raise LIC's free-float to 10%, but later extended the deadline to May 2027 after the stock traded weakly.
The Stock Exchange of Hong Kong published a consultation paper in January this year that proposes lowering the initial minimum public float at listing to tiered thresholds of between 5% and 25% from the current standard 25% threshold (though it can be lowered to 15% or even lower for large floats, on a case-by-case basis). An initial free-float requirement of 10% of issued shares, or HK$600m (US$77m) by market value, would be established.
In February, the Stock Exchange of Thailand sought feedback from the market on a proposal to allow companies with a paid-up capital of Bt10bn (US$297m) or more to sell 17% of their capital at the time of listing as against 20% under current rules. Market participants had to give their feedback by March 18.