PSE encourages small firms to enlist in stock market-A A +A
Wednesday, August 21, 2013
THE Philippine Stock Exchange (PSE) is encouraging small and medium enterprises (SMEs) to launch initial public offerings (IPO) saying the local bourse is not just for major players.
PSE president and chief executive officer Hans Sicat said the PSE is getting high demand on listing but low in terms of attracting SMEs to get on board.
Sicat said that with last month’s global market volatility, four companies who were about to do their IPOs postponed it for a month or two to await stability.
Microfinance and consumer loan service firm AG Finance Inc., however, pushed through and raised about P150 million from its IPO last Aug. 13.
Sicat said that although they established a small and medium emerging (SME) Board, the PSE hasn’t done very well in having these companies launch IPOs.
“The SME is still a large untapped market,” Sicat said during his recent visit here.
While there are those open to get listed, Sicat noted that majority in the sector are still contemplating whether to participate or not because of the processes involved.
But he emphasized that the stock market already eased the rules and made them “SME-friendly.”
Sicat said there are major factors that hold SME from joining the stock market. One of these is the interest rate which has remained low over the last two years. “Instead of going into the capital market, SMEs opted to approach banks who can lend them money,” he said.
Some business owners are also concerned with the exit strategy.
“They are figuring out it might be better to exit when they are a larger company than a smaller company. Therefore, they would rather grow the company over the next two years so by the time they do their IPOs, they are all in the main board. Why are they doing this? It’s because usually multiples are higher in the bigger board,” Sicat said.
Some small companies would also partner with private firms if they can’t get money in the bank.
“Most small companies we thought would list in the SME Board deferred listing until they become big but we are still encouraging them because those companies in the SME Board who are small can grow and become big companies,” he said.
But Sicat said this trend may change if interest rates would increase and SMEs would now look at the capital market as a viable channel.
There are only two small companies under the SME Board, some have already graduated to big companies, said Sicat.
“The confidence to participate in the stock market is still there. The country’s fundamentals have not changed and it remained stable,” he said.
Published in the Sun.Star Cebu newspaper on August 22, 2013.