‘IPOs to hit record this year’

The Philippine Stock Exchange (PSE) is set to post this year the highest number of initial public offerings (IPOs) in 26 years and put an end to the single-digit number of maiden offerings since 1997.

PSE President and CEO Ramon S. Monzon attributed the higher number of IPOs for the year to a confluence of several factors, including the implementation of some of its policies and program that sought to entice more companies to go public.

“We see companies requiring capital to fund their post-pandemic recovery plans. At this time of high interest rate regime, selling shares to the public is a more viable option than taking out loans. It helps that we relaxed our listing rules last year and government repealed the IPO tax under Republic Act No. 11494 also known as the Bayanihan to Recover as One Act or Bayanihan II.”

The PSE has so far recorded 8 IPOs for the year, or the same number for the entire 2021, but three more companies are expected to list before the end of 2022.

The record number of offerings was reached in 1994, when the PSE had 21 IPOs.

The amended listing rules of the PSE and the Bayanihan II IPO tax repeal have contributed to a faster, more accessible road to IPO, the bourse said.

In March 2021, the Securities and Exchange Commission approved the amendments to PSE’s consolidated listing and disclosure rules. Among the salient items in the amended rules include the time-bound relief for IPOs filed in 2021 and 2022. This provision permits the PSE to consider, on a case-to-case basis, the profitability of the applicant for any two fiscal years in the three most recent fiscal years, excluding the year of the impact of the Covid-19 pandemic.

For instance, if the pandemic-induced negative impact on the financial condition and results of operations occurred in 2020, the two most recent fiscal years will be 2019 and 2021.

Specific requirements for main and small, medium and emerging (SME) board listing were also introduced.

For the main board, the PSE previously required that the profit test, market capitalization test and shareholders’ equity requirements should be satisfied. Under the new rules, the market capitalization test was removed but the two other requirements must be met by the IPO applicant.

The profit test was also revised such that the applicant-company must show a net income of P75 million for the last three financial years and a net income of P50 million for the most recent financial year.

In the past, the profit test used the company’s earnings before interest, taxes, depreciation and amortization (EBITDA), requiring at least P50 million for the last three years and a minimum EBITDA of P10 million for each of the three years as gauge.

For the SME board, from a purely EBITDA-based screening, the applicant now has the option to satisfy either the EBITDA requirement or the net sales or operating revenue of at least P150 million for the last three years or such shorter period as the company has been operating. It also needs to show at least a 20 percent average growth rate for net sales or operating revenues over the latest two years. The bourse also shortened to two years from three years the operating history requirement.

“There are several companies that do not qualify to list based solely on the SME board listing requirements. We want the stock market to be accessible to these businesses and give them equal opportunity to raise capital through equity financing, especially if they are profitable and have rosy growth prospects,” Monzon said.

To further assist potential listing applicants in their future IPO journey, the PSE is hosting the Road to IPO 2022 forum on September 15. The virtual session aims to help business owners understand the strategic value of becoming a publicly listed company and obtain firsthand information on how to prepare for a maiden share offering from members of an IPO deal team.

“We want this Road to IPO activity to dispel the notion that an IPO is a daunting undertaking. Through this forum, we want to demystify the IPO process and simplify what is seemingly technical about going public with the help of speakers that have conducted their own IPOs and those who are tapped by companies to help them in their IPO journey,” Monzon said.

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