Reaffirming the importance of 20% public float rule

In a constantly shifting financial environment, safeguarding the fairness, transparency, and efficiency of the capital market is paramount. One vital safeguard, often overlooked but foundational to market integrity, is the minimum public float requirement.

Recent market chatter has tied this issue to speculation about a potential initial public offering (IPO) by a major financial technology company. 

This has fueled speculation that regulators might ease existing rules to accommodate such an offering. It bears stressing, however, that as far as policy is concerned, the Securities and Exchange Commission (SEC) continues to strictly uphold the 20-percent minimum public float requirement.

A public float refers to the portion of a corporation’s shares that is freely tradable and widely held, excluding those under the control of strategic shareholders. A sufficient level of public ownership is more than a technical listing requirement, it is central to the health of the market as a whole. Keeping the public float at 20 percent ensures:

1. Stronger Market Liquidity. A higher public float increases the number of shares available to the investing public, ensuring that trades can occur smoothly without large price distortions. This liquidity is crucial not only for day-to-day trading but also for maintaining investor interest and activity over time. A weakened float often results in infrequent trading, wider spreads, and a distorted view of a stock’s true value.    Turn to page 11

2. Better Price Discovery and Lower Volatility. When more investors participate in the market, the pricing of shares reflects a broader set of perspectives. A 20-percent float helps ensure that prices move based on genuine supply and demand, not on isolated trades or the actions of a few dominant shareholders. This leads to stronger, more reliable price discovery and shields the market from unwarranted volatility.

3. Reduced Risk of Manipulation. One of the gravest dangers of a low float is how easily stocks can be manipulated. With fewer shares circulating, it becomes possible for small groups of investors to artificially inflate, suppress, or corner the market for a stock. These practices, whether through coordinated trading, pump-and-dump schemes, or other forms of manipulation, undermine investor confidence and damage the market’s reputation. A 20-percent public float serves as a buffer against such risks.

4. Alignment with Global Benchmarks. Many international markets maintain similar or even stricter public float requirements to ensure investor protection. Keeping the threshold at 20 percent helps the Philippines remain competitive and credible, especially for global investors who look to regulatory standards as a marker of stability.

5. Support for Capital Market Development. A healthy public float is indispensable for building a deep and resilient capital market. The more widely held a company’s shares are, the more attractive the market becomes to institutional investors, long-term funds, and international participants. This, in turn, fuels further growth, innovation, and investment opportunities.

Far from being a mere formality, the minimum public float is a critical mechanism that ensures fairness, broad participation, price stability, and investor protection. As the Philippine capital market continues to evolve, preserving these principles is paramount.

Maintaining the 20-percent minimum public float is not only a commitment to robust regulation but also a commitment to a market where every investor, big or small, can participate confidently and fairly.