With just three weeks remaining until the deadline set by the Philippine Stock Exchange, twenty-five (25) publicly-listed firms remain in danger of being delisted from the local bourse for failing to meet the rule on minimum public ownership.
Back in June 2012, at least 27 companies have been reported to have not met the 10% public float requirement and were given until December 31, 2012 to comply. (See: PSE to delist 27 firms if 10% Public Float rule not met)
The public float requirement by the PSE requires publicly-listed firms to maintain at least 10% of a company’s total outstanding stock to be freely available in the market and to be owned by the general public. The move is meant to ensure that publicly-traded companies are indeed “public” and not controlled by a single, large bloc or by a few controlling shareholders.
The PSE gave companies until the end of the year a chance to rectify their ownership structure. Companies can issue more shares to the public or sell back previously-bought shares in order to meet the 10% minimum required ownership level.
Firms that will be unable to meet the rule by the deadline will face a 6-month trading suspension effective January 2013. After the 6-month period, if the companies remain non-compliant, their shares will be permanently delisted from the exchange starting July 1, 2013.
Companies on trading suspension or delisted may still be traded among investors but not through the PSE anymore, making the stock a bit illiquid. In addition, stocks that are not traded on the exchange are slapped with higher capital gains tax. Instead of paying the regular capital gains tax of 1.5%, trades are charged 5% if the net capital gain is less than P100,000 and 10% if the net capital gain is above P100,000.
The 25 companies that have still not met the 10% minimum public ownership rule are as follows.
Comparing the table above to the list of companies below the required public float as of June 2012, it looks like very few companies have tried to increase their public stake. Most of them are choosing to voluntary delist or had share swap agreements with affiliate companies.
Those choosing to voluntary delist include:
- Alaska Milk Corporation (AMC)
- Eton Properties (ETON)
- Metro Pacific Tollways Corp. (TOL)
- First Metro Investment Corp. (FMIC)
- Southeast Asia Cement Holdings (CMT)
Ramon Ang of the San Miguel Group of Companies have previously said their companies will try their best to comply but given three more weeks before the deadline, it looks like the conglomerate is opting for a delisting of its companies, including San Miguel Brewery Inc. (SMB) and San Miguel Properties Inc. (SMP).
In November 2012, Lafarge Republic Inc. (LRI) conducted a share swap deal with CMT shareholders, converting 3.73 CMT shares for every 1 share of LRI. Consequently, LRI’s public float increased beyond 10% while CMT’s public stake further decreased and the company decided to voluntary delist.
In August 10, 2012, JTH Davies Holdings (JTH) similarly executed a share swap agreement with shareholders of STI Education Services Group Inc. (STI ESG), effectively acquiring 96% of the latter’s shares. As a result, JTH Davies Holdings (JTH) changed its names to STI Education Systems Holdings (STI) and has since been traded as such.