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THE
Securities and Exchange Commission (SEC) may ask the
Philippine Stock Exchange (PSE) to reevaluate its
policies on backdoor listing and chain listing to avoid
potential confusion among investors.
A
high-ranking official of the commission noted that
backdoor listing is becoming an easy way for companies
to go public.
“By
simply acquiring a dormant listed company, they gain
entry to the capital market. This triggers confusion
among investors because of the change in the business
purpose of a company,” the SEC official said.
Companies that fail to meet the criteria for listing on
the stock exchange may instead buy a listed company, an
approach called backdoor listing.
A number
of enhancements to the PSE’s backdoor listing rules were
approved by the SEC two years ago. Among these is
suspension of trading of shares of a listed company that
is the subject of a backdoor listing issue.
The
exchange also requires the listing company to submit a
comprehensive disclosure and other information about the
transaction.
The SEC
official also took note of the chain-listing policy of
the bourse, which is somewhat preventing large companies
from selling their shares to the public.
The
exchange’s chain-listing rule states that a subsidiary
or parent company of a listed firm will not be
considered suitable for listing if its assets and
operations are substantially the same as those of the
already listed firm.
A case
in point is that of Smart Communications Inc. It was
supposed to have an initial public offering in August
2004.
PSE has
long been eyeing Smart to do an IPO given its
attractiveness and its ability to provide liquidity to
the market. But the chain listing rule of the exchange
has prevented it from going public. This rule has been
cited by Philippine Long Distance Telephone Co. (PLDT) a
number of times.
“Since
PLDT is the most widely held publicly listed company in
the Philippines, both in terms of common and preferred
shares, the state policy of encouraging public ownership
of both PLDT and Smart to the widest extent possible has
already been achieved,” according to the PLDT.
Earlier,
PSE president Francis Lim said they might have to study
the possibility of amending the chain-listing rule to
accommodate the entry of Smart and other companies that
maybe covered by such rule. |
