PSE to SMEs: Consider capital markets as platform to raise funds

The Philippine Stock Exchange (PSE) is working to encourage more small and medium enterprises (SMEs) to go public, especially since it relaxed its listing rules for initial public offerings (IPO) and introduced more programs that assess the readiness of SMEs for the IPO listing.

PSE president and chief executive officer Ramon Monzon, in his recent visit to Cebu City, said he expects more SMEs to consider the capital markets as a platform to raise funds for their long-term growth, business expansion, and acquisition.

The PSE is targeting 14 IPOs for the year. The potential listing applicants include 11 companies and real estate investment trusts that will list on the main board and the remaining three are firms that are expected to debut on the SME board.

In an IPO, a privately owned company lists its shares on a stock exchange, making them available for purchase by the general public.

“There are many reasons why companies go public. It’s a strategic option for them to raise capital for market expansion, launch a new product, international presence, research and development fund, and other strategic requirements for the company,” said Monzon. “IPO listing offers capital raising potential for SMEs,” he added.

There are currently 285 listed companies in the local bourse, of which 10 percent are SMEs.

Last year, the PSE had nine IPOs, the most in a single year since 2007.

To entice SMEs to participate in the stock market, Monzon said the PSE has liberalized its IPO listing rules.

For the SME board listing, applicants now have the option to satisfy either the Ebitda requirement or the net sales or operating revenue.

Under the amended rules, applicants need to have cumulative net sales or operating revenues of at least P150 million for the last three years.

SME board applicants are no longer required to have a positive Ebitda in the last two-three fiscal years, preceding application, and to have a P100 million minimum authorized capital stock.

The local bourse also introduced a sponsor model provision for listing applicants in the SME board which allows sponsors accredited by the PSE to endorse applicants, which did not qualify based on listing requirements alone.

“This sponsor-model program approved by the Securities and Exchange Commission will allow us to attract startup companies that have no track record,” Monzon said. “The sponsor’s obligation is to handhold these companies for three years and make sure that they are complying with the requirements of the local bourse.”

PSE also shortened the SME board applicants’ operating history requirement to two years from the previous three years requirement.