AT least 37 percent of the total listed firms will be affected when the proposed increase in minimum public ownership is implemented by the Securities and Exchange Commission (SEC).
According to Philippine Stock Exchange (PSE) data, as of end-March, about 121 of the 322 total listed firms will be affected by the SEC’s move to double the minimum public float of listed firms to 20 percent, from the current 10 percent, by end of 2020. The regulator cited market uncertainty for delaying for more than a year the application of the new rule.
As of March, about 41 listed companies had float levels of 15 percent and below, while 68 listed companies had float levels below 20 percent. Notably, there are 12 listed companies whose float level is at 10 percent.
The average public float of listed companies as of end-March 2017 is at 35.6 percent. The firm with the most free-float level is Swift Foods Inc., followed by ATN Holdings Inc. with 90.88. Basic Energy Corp. has 87.65 percent, Omico Corp. has 85.87 percent and Geograce Resources Philippines Inc. is at 85.37 percent. In the proposed SEC memorandum circular, the regulator said come July, all firms filing for their initial public offering should have to float at least 20 percent of its issued and outstanding shares by 2020.
According to the proposed rules, which is still subject for public comments through June 15, companies with existing registration statements filed with the SEC and whose shares are currently listed and traded in the PSE must 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. 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 nonstrategic in nature.
Significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered strategic and, thus, excluded in the public float of the company.
Earlier, the SEC mulled over imposing a 2.5-percent increase in the current 10-percent minimum public float. Another 2.5 percent will be imposed months later to increase the float to 15 percent. Noncompliance of the minimum public ownership requirements may result to publicly listed companies being subjected to administrative sanctions, the SEC said, citing Section 54 of the Securities Regulation Code. Noncompliant firms may also be subjected to a higher tax rate.
Under Bureau of Internal Revenue Regulations 16-2012, all publicly listed companies are required to maintain a minimum public ownership as prescribed by the SEC so as to enjoy preferential tax treatment. The sale, barter, exchange or other disposition of shares of stock of publicly listed companies that meet the minimum public float is subject to a stock transaction tax of one-half of one percent of the gross selling price.
If the firm fails to meet the set minimum public float, it will be subject to a final tax of 5 percent or 10 percent on the net capital gains and documentary stamp tax.
SEC Chairman Teresita Herbosa earlier said the agency aims to make the Philippine capital market on equal footing with its Asean counterparts that have a minimum public participation requirement of 20 percent to as much as 25 percent.
To note, when the PSE implemented the increase of the minimum public float rule to 10 percent in 2011, a number of listed companies decided to voluntary delist themselves from the market. The PSE also forced-delisted one firm after giving most companies a year and a half to prepare before the minimum public float rule was enforced.