How to subscribe to an IPO with cash of P25,000 or less
Do you know that you can invest in stocks — and even take part in a company’s initial public offering or IPO — with just P25,000 or less?
Thanks to the Local Small Investors (LSI) Program of the Philippine Stock Exchange (PSE), this is now possible.
What is the Local Small Investors (LSI) Program?
The Local Small Investors (LSI) is an initiative of the PSE to encourage more individuals to become stock investors even if they don’t have millions or hundreds of thousands of pesos.
So if you have already saved P25,000 or even less, you can invest in the stock market and be one of the first public shareholders of a company!
What is an IPO?
An IPO or Initial Public Offering is the sale of a private company’s stock to the public for the first. In other words, it is the first offering (or selling) to the general public some shares of stocks of an originally privately-held company — hence, the term initial public offering.
An IPO is a way for a company to raise cash, the proceeds of which are usually used to pay off the company’s existing debt, expand operations, or sometimes just to enhance the price of the shares of the original stockholders (providing a way for original owners and investors to cash out or to raise the share prices to market level).
Once a company has concluded its IPO, its shares are then listed in a stock exchange and will start to be “publicly traded”.
How do I take part in the Local Small Investors (LSI) Program?
Under the PSE’s LSI program, a company conducting an Initial Public Offering (IPO) is required to allot 10% of its total IPO shares to “local small investors”.
A local small investor is defined as an investor “intending to subscribe to a minimum board lot or whose subscription does not exceed P25,000.”
That means if you only have P25,000 or less, you are qualified to become a local small investor and you can take part in the IPO!
Example: if a company’s IPO stock is priced at P25 per share, you can buy as many as 1,000 shares! (That’s 1,000 x P25 = P25,000; but that doesn’t include stock fees and taxes yet.)
Take note that if you plan on subscribing to more than P25,000 worth of IPO shares, you are not eligible to join the LSI and you will have to buy shares via the regular IPO sale.
What are the steps to become a Local Small Investor (LSI)?
First, you must have an existing account with any of the licensed stock brokerage companies (or stockbrokers) in the Philippines.
Next, secure the following forms from the broker and fill out completely:
- four (4) copies of the LSI application form
- two (2) signature cards to be verified by the broker receiving your application
Together with these forms, submit as well a photocopy of your two (2) valid government-issued IDs such as SSS, GSIS, Driver’s License, Passport, or PRC ID.
You may submit all requirements to your stockbroker or to any of the PSE’s Receiving Centers in PSE Ayala (Makati) or PSE Tektite (Ortigas, Pasig). Receiving hours are from 9:00 am to 5:00 pm during the offer period and from 9:00 am to 12:00 noon on the last day of the offer period.
Easy, right? Because of the LSI program, you’re on your way to becoming a stock investor even with just P25,000 or less! Congrats!
Other awesome articles that might interest you!
- “It’s Not Easy to Make Money in Stocks”
- Is stock market investing for you?
- Survey: Best stockbrokers in the Philippines?
- Table of Fees and Charges when Trading PSE Stocks