Bourse to tighten delisting rules

By Denise A. Valdez
Reporter

THE PHILIPPINE STOCK EXCHANGE, Inc. (PSE) is preparing stricter rules for companies that want to delist, in order to protect minority shareholders.

PSE President and Chief Executive Officer Ramon S. Monzon told reporters on Wednesday that the bourse operator has drafted proposed revisions of voluntary delisting rules.

This draft, he said, will have at least two significant changes: shareholders will need to approve any delisting plan of a company, and the tender offer price for delisting will consider the company’s highest price in the last six months.

Mr. Monzon said PSE’s existing rules require a delisting company to get the approval only of its board. The PSE wants to also require approval of all independent directors and 67-75% of a company’s shareholders.

On the tender offer valuation, Mr. Monzon said existing rules allow delisting companies to use the price given by a fairness opinion provider. Under the proposed amendment, the PSE will look at the highest price of the company for the last six months versus the fairness opinion price, and follow whichever is higher.

“We presented this to our board. Our board has approved it. But now we’ve brought it out to the stakeholders for public comments,” he said.

Once comments and suggestions are gathered, which the PSE expects by first week of December, the proposed amendment will be submitted to the Securities and Exchange Commission for approval.

The PSE’s review of its delisting rules follows the delisting announcement of Travellers International Hotel Group, Inc. in August and Melco Resorts & Entertainment (Philippines) Corp. last year. Analysts noted then that some small shareholders felt disenfranchised in these firms’ exit. In the former’s case, some cited a tender offer price that was higher than its volume weighted average price and lower than its initial public offering (IPO) price.

With the PSE’s proposed changes, Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said small shareholders will be more protected from similar occurrences in the future.

“This would be a much better system wherein the minority shareholders get to participate in the delisting so they wouldn’t feel duped by majority owners, especially if (the tender offer) price is lower than the IPO,” he said in a mobile phone message.

“This is a much predictive pricing rather than the current means of valuation wherein it’s hard to accept how they arrive at the pricing,” he added, referring to the current practice of basing the tender offer price on fairness opinion.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said via text message: “That move would give a voice to small investors… Also most likely, even though they have a smaller pie in the company, they represent many individuals/corporations as well.”

The PSE also said on Wednesday it is looking at requiring a higher minimum capitalization for registered brokers amid the rogue clerk case that rocked R&L Investments, Inc.

“We are looking at some steps that hopefully will rationalize the broker industry some more,” he said. “We’re looking at some things, like increasing their capital, things like that.”

He said that, with this safeguard measure, brokerages “can afford to hire enough people to be able to have those correct internal controls,” noting that the R&L issue was caused by an employee that handled both the front and back end of transactions.