PSEi gauntlet
Listed gaming operator DigiPlus is gunning for inclusion in the Philippine Stock Exchange index (PSEi), which an analyst says may happen as early as today.
Its proximity to the State of the Nation Address (SoNA) on 28 July, however, puts such a prospect at risk.
While DigiPlus has likely met the quantitative criteria of market capitalization and liquidity to be included in PSEi during the review period, the PSE has the authority to exercise its discretion if “material risks affect a company’s investability or sector outlook.”
Article 3.2.1 of the PSE’s rules allows the exchange to exclude companies facing significant risks, even if they meet the standard metrics.
The recent stock price drop and regulatory uncertainty over the online game operator could prompt the PSE to delay or reject its inclusion to avoid exposing the index to a volatile stock.
The SoNA is expected to provide clarity on the government’s stance on online gambling.
Analysts suggest a total ban or stringent regulations could further depress the stock price of a potential bellwether member.
The timing of the PSEi announcement, just days before the SoNA, creates a “tricky situation” for investors, as index funds would be locked into holding a stock facing potential regulatory headwinds until the next rebalancing.
If the PSE delays its inclusion due to regulatory concerns, DigiPlus’s stock may face further pressure from disappointed investors.
DigiPlus has emphasized its support for regulation over prohibition, highlighting existing safeguards like know-your-customer verification, age restrictions, and deposit limits.
DigiPlus chairperson Eusebio Tanco has expressed readiness to collaborate with regulators to promote responsible gaming, which could mitigate some risks if the government opts for stricter oversight rather than a ban, an analyst said.