The Securities and Exchange Commission (SEC) defended its enforcement of the 20 percent minimum public float requirement for initial public offerings (IPOs), granting exemptions only if companies close the gap within the required timeframe.  

In a statement on Thursday, the SEC clarified its approval of a temporary reduction in the minimum public float comes with the strict condition that companies must “bridge any gap from the 20 percent standard within less than 24 months from the listing date and only as deemed necessary by the Commission.”  

“Beyond enhancing market liquidity, the minimum public ownership requirement plays a crucial role in improving price discovery and reducing opportunities for price manipulation,” the SEC said.  

“The float requirement also seeks to reduce ownership concentration and encourage good corporate governance, ultimately strengthening the Philippine capital market,” it added.

As of 25 March, the SEC said it has yet to receive any application for regulatory relief from any potential IPO applicant.

Market liquidity addressed

For PSE president and CEO Ramon S. Monzon, the temporary reduction also aims to address market liquidity concerns.

“With the liquidity problems we’re having in the market now, companies are having a hard time deciding on an IPO,” he said in a recent interview. The adjustment allows firms to list at a lower float if they conduct a follow-on offering or private placement within two to three years to meet the 20 percent requirement.  

“It’s not permanent. It’s a transition until the market recovers,” Monzon said, adding that the policy will initially be in place for two years, with a possible extension based on market conditions.  

Meanwhile, the SEC reiterated its commitment to “a fair, transparent, and efficient capital market” while ensuring new listings meet regulatory standards that safeguard “the integrity and long-term stability of the Philippine capital market and the broader economy.”

The minimum public ownership rules for IPOs are outlined in SEC Memorandum Circular 13, Series of 2017, which raised the public float requirement to 20 percent from the previous 10 percent.