The Philippine Stock Exchange, Inc.

PSE completes P2.9B rights offer

Listing of PSE’s P2.9B stock rights offer shares: Shown in photo (L-R): PSE Treasurer Omelita J. Tiangco; PSE COO Roel A. Refran; PSE Director Eddie T. Gobing; PSE President and CEO Ramon S. Monzon; PSE Chairman Jose T. Pardo; PSE Director Alejandro T. Yu; PSE Corporate Secretary Aissa V. Encarnacion and PSE Director Emmanuel O. Bautista

The Philippine Stock Exchange (PSE) has completed a P2.9 billion stock rights offering, proceeds from which are mostly meant to fund an acquisition that will unify the country’s capital market infrastructure.

The new 11.5 million new shares issued by the PSE at P252 per share were listed on Thursday after a bell-ringing ceremony.

“This SRO (stock rights offering) provided investors greater opportunities to own shares of PSE, which has been profitable for several years and regularly distributes a substantial amount of dividends to shareholders year in and year out. Now that the shares can be traded in the market, investors can be shareholders of a bigger, more robust PSE,” PSE chair Jose Pardo said in his remarks during the listing ceremony.

Eduardo Francisco, president of BDO Capital & Investment Corp., said the offering was oversubscribed, adding, however, that was he was not authorized to disclose by how many times the oversubscription was relative to the base offer. Subscribers were mostly domestic investors, he noted.

BDO Capital and First Metro Investment Corp. were the lead underwriters for the offering, which ran from March 12 to 16.

About 55 percent of the proceeds from this offering will be used to repay debt to be incurred in connection with the PSE’s plan to acquire the Philippine Dealing Systems Holdings Corp. (PDS Group), the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp., Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp. It is uncertain, however, on whether this transaction can proceed.

“We just have to wait for SEC ( Securities and Exchange Commission) exemptive relief for PSE to buy PDS shares,” Francisco said, referring to a request from the PSE to be exempted from the 20 percent limit that any single industry can own in an exchange.

Such exemptive relief is a pre-condition to the closing of deals that will raise the PSE’s interest in PDS to 72 percent.

But in the event that the PDS deal falls apart, the PSE has provided for alternative uses for the proceeds.

“They will still use proceeds for system upgrades and other improvements,” Francisco said.

The P2.9-billion stock rights offering allows the PSE to dilute the cumulative shares of stock brokers and eventually comply with the single-industry ownership limit of 20 percent.

Meanwhile, a rival bid to take over PDS has emerged from the state-controlled Land Bank of the Philippines.



PSE rules out bidding war with Landbank

The Philippine Stock Exchange is awash with P2.9 billion in cash from an equity deal mostly meant to fund the acquisition of Philippine Dealing Systems Holdings Corp. (PDS Group) but it is not likely to engage in a bidding war against state-owned Land Bank of the Philippines.

Ahead of a due-diligence audit on PDS, Landbank has announced an offer of P360 a share of PDS, the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp., Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp. The government bank’s offer is higher than the PSE’s offer of P320 a share.

“I don’t think we should be engaging government in a bidding war,” PSE president Ramon Monzon said in a press briefing after the listing of new shares issued by the PSE on Thursday. He noted, however, that this was only his personal opinion.

His view was shared by PSE chair Jose Pardo, who said the exchange was not considering to raise its offer.

“We really have nothing but the interest of strengthening the capital market and I think the DOF (Department of Finance) and SEC (Securities and Exchange Commission) have the same thing in mind: Growing the economy on a sustainable basis,” Pardo said.

“It’s just that there are pockets of differences sometimes,” he added.

The PSE has so far secured commitment from various shareholders to buy 72 percent of PDS but all these agreements – which had been extended three times in the past – would lapse on March 31. The exchange has not asked for another extension of the purchase agreement.

The local bourse has two pending issues with the Securities and Exchange Commission. The first involves ongoing initiatives to comply with the 20 percent limit on brokers’ ownership of the PSE and the second one involves the exemptive relief needed by the PSE to be able to own a controlling stake in PDS.

The existing securities law prevents any single industry from owning more than 20 percent of an operating exchange while no single institution can own more than 5 percent, unless given exemptive relief.

The stock rights offering concluded by the PSE has diluted brokers’ ownership, but the SEC has said the PSE was still not compliant with the ownership cap.

On the PDS acquisition, the PSE has written to the SEC reiterating request for the exemptive relief.

“It’s beyond our control for it to proceed. We need approval from regulators,” Monzon said. But if the PSE won’t get the approval, he said it would be “business as usual” for PSE.

Based on its prospectus, 55 percent of proceeds from the P2.9-billion stock rights offer will be used to repay debt to be incurred from the acquisition of PDS.

But in the event that the acquisition of PDS does not push through, the prospectus said the PSE would utilize part of the proceeds to “explore other opportunities to expand its business and operations.”

“These include, but are not limited to, partnerships with relevant institutions to develop products and services, and funding of technology and other capital-intensive activities to enhance operational and strategic capabilities,” the prospectus said.

“The company is also looking at initially investing the proceeds in income-generating assets such as government securities, money market funds, and time deposit facilities, and will deploy said proceeds in accordance with strategic initiatives that the company may pursue in the future,” it added.



Landbank offers Philippine Stock Exchange P472M for PDSHC stake
The state-run bank takes another stab at gaining control of the country's bond trading market

MANILA, Philippines – State-run Land Bank of the Philippines (Landbank) took another step to control the bond market with an offer to purchase the stake of the Philippine Stock Exchange (PSE) in Philippine Dealing System Holdings Corporation (PDSHC).

The PSE announced in a disclosure on Friday, April 27, that Landbank wants to purchase "its entire equity stake in PDSHC at P360 per share for a total purchase price of P472,118,040."

"The offer is subject to certain conditions and is yet to be discussed by the company's board of directors," the PSE added.

The PSE currently holds a 20% stake in PDSHC, the holding firm which operates the country's fixed-income or bond market.

Over the past few years, the PSE has sought to gain control of PDSHC to unify the equity and bond market platforms, but has run into trouble over regulatory issues.

In particular, it has yet to clear the Securities and Exchange Commission (SEC) requirement that no trading platform be more than 20% owned by brokers.

Back in March, Landbank stepped in and announced plans to acquire 66.67% control of PDSHC, offering P360 per share to its shareholders for a total of P1.5 billion. The due diligence was fast-tracked by its chairman, Finance Secretary Carlos Dominguez III.

This offer, which Landbank said it recently renewed, was also higher than the PSE's previous offer to PDSHC shareholders of P320 per share, made in June 2017. 



PSE may introduce short selling to the market

MANILA, Philippines — The Philippine Stock Exchange (PSE) will soon introduce a short selling facility to the stock market to support its securities borrowing and lending program.

The Securities and Exchange Commission (SEC), the corporate regulator, has approved the PSE’s plan.

This would be the first time the PSE is allowing such a facility in the market.

“Since this is the first time we are introducing short selling, our guidelines were crafted with the goal of ensuring that short selling transactions are transparent and effectively monitored. Even with a limited number of eligible securities and a cap on short interest to begin with, we believe that the ability to take short positions will further spur trading activity and attract more investors to our market,” PSE president Ramon Monzon said.

In industry parlance, short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. In some instances, short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit.

Monzon said short selling is in place in several exchanges and is utilized by investors as a hedging mechanism.

“We are grateful to the SEC for approving the guidelines for short selling. We are optimistic that this facility will lend support to our securities borrowing and lending program and help improve liquidity in our market,” Monzon said.

The approved implementing guidelines for short selling transactions include provisions on eligible securities, procedures for short selling transactions, and the execution of short selling orders, among others.

As part of the rules, the PSE said that in the case of eligible securities, members of the PSE index (PSEi) and exchange traded funds are the only securities considered as eligible for short selling transactions.
 “For any eligible security, only 10 percent of its outstanding shares can be shorted. The limit acts as a safeguard for the orderly conduct of short selling activities, while still providing ample room for price discovery,” the PSE said.

Trading participants will have to ensure that the client has entered into the necessary securities borrowing arrangements prior to entering a short selling order.

Such borrowing arrangements must adhere to existing SEC, PSE and Bureau of Internal Revenue regulations governing securities borrowing and lending.



Bourse operator creates real estate subsidiary

THE Philippine Stock Exchange, Inc. (PSE) will establish a new subsidiary that will handle its real estate assets, including its old office in Ayala Avenue, Makati City.

In a disclosure posted on Thursday, the PSE said its board of directors has approved the incorporation of PSE Realty, Inc. (PRI). The wholly-owned unit will have a capitalization of P1 billion, of which P701.80 million will be subscribed and paid-up.

The PSE earlier said that it can either sell the office spaces in Ayala Tower One or rent them out instead.

The bourse operator moved out of its office in Ayala Tower One last February, in favor of the new PSE tower along Bonifacio High Street. The new building stands 26-storeys high and has a gross leasable area of 30,000 square meters. Aside from the PSE, the building also houses more than 100 active trading participants.

The PSE has already sold its old office, the PSE Tektite Building in Ortigas Center, to Philippine Realty Holdings Corp. (Philrealty) for P257.18 million in August last year. Philrealty was the developer of the Tektite Building.



...yan ulit target nila next year kasi short sila this year

PSE targets P200B from fund raising

THE PHILIPPINE Stock Exchange, Inc. (PSE) is projecting P200 billion from listed companies’ fund raising in 2019, despite falling short of the same target this year.

PSE President and Chief Executive Officer Ramon S. Monzon said listed companies have raised a total of P187.84 billion so far from the equities market in 2018.

“So we’re still P12 billion short. Can we repeat that feat next year? I hope so… We’re gonna try to hit P200 billion again next year,” Mr. Monzon told reporters in a briefing at the bourse’s site in Bonifacio Global City on Tuesday night.

At the same time, Mr. Monzon noted that the country’s big banks have already conducted their fund-raising activities this year, citing Metropolitan Bank and Trust Co. (Metrobank), the Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corp. (RCBC) and Union Bank of the Philippines, Inc. (UnionBank).

These four banks conducted stock rights offerings in 2018, contributing majority of the capital raised at the PSE. Metrobank raised P60 billion, while BPI made P50 billion. RCBC and UnionBank generated P15 billion and P10 billion, respectively.

“… [E]verybody’s going to bank bonds. You go to bank bonds because the reserve requirement… is very small so you have more funds to lend out,” Mr. Monzon explained.

The Bangko Sentral ng Pilipinas (BSP) last August relaxed rules that would allow banks to raise capital via corporate bonds without securing central bank approval. Banks would need to comply only with existing rules of the Securities and Exchange Commission, as well as submit a certification of compliance and other supporting documents to the BSP.

Other companies that conducted stock rights offerings this year include PetroEnergy Resources Corp. which raised P758.3 million; Robinsons Land Corp., P20 billion; Integrated Micro-electronics, Inc., P5 billion and the PSE itself which raised P2.9 billion.

Property and construction firm D.M. Wenceslao & Associates, Inc. was the only company that conducted an initial public offering (IPO) despite the market volatility this year, raising about P8.15 billion for its expansion plans.

“Two were about to do it but backed out at the last minute,” Mr. Monzon said.

“Next year I think will depend on the market. If the market really is in the high 7,000 or 8,000, baka maraming maengganyo mag-IPO (there may be many companies that will be encouraged to conduct IPOs).”

Canned fruit manufacturer Del Monte Philippines, Inc. and tech manufacturer Cal-Comp Technology (Philippines), Inc. were the two firms that announced their intention to enter the exchange this year, but postponed their plans due to the weakness of the market.

There are also three companies that could enter the bourse through the backdoor, including businessman Dennis A. Uy’s PH Resorts Group Holdings, Inc. through Philippine H2O Ventures, Corp. as well as his holding firm Udenna Corp. through ISM Communications Corp. Tiger Resort Leisure and Entertainment, Inc. also plans to enter the PSE by taking over shell firm Asiabest Group International, Inc.

This year also saw Global Ferronickel Holdings, Inc. and DoubleDragon Properties Corp. conducting follow-on offerings, raising P517.5 million and P4.5 billion, respectively.

IRC Properties, Inc.; China Banking Corp.; Basic Energy Corp. and Golden Bria Holdings, Inc. also raised funds via private placements this year.



PSE to tighten rules on selection of fairness valuation providers

THE Philippine Stock Exchange, Inc. (PSE) plans to impose stricter guidelines on the selection of fairness valuation providers for companies in need of valuation reports, in a bid to protect small investors.

“What we’re going to do now is if you’re going to do a tender offer or any offering that will require a fairness opinion, you will give the exchange a list of three fairness opinion providers acceptable to you,” PSE President and Chief Executive Ramon S. Monzon told reporters in a press briefing in Taguig on Tuesday night.

“And then we will engage them and they will report to us.”

This is opposed to the current practice of firms tapping a fairness valuation provider by themselves, although the selection is from a list of companies accredited by the PSE.

Mr. Monzon said they will charge the company for the valuation fees, which will then be used to pay the fairness valuation provider. This will ensure that the provider remains independent from the issuer.

PSE Chief Operating Officer Roel A. Refran said they are currently asking for public comments for the proposed rule change, after which it will be transmitted to the Securities and Exchange Commission for approval. This will amend PSE Memorandum No. 2011-0104, or the Guidelines for Fairness Opinion and Valuation Reports.

“We really are here to protect the small investors… Moving forward, that’s why we had this proposed rule change para mawala na ang reklamo sa (so there will be no complaints about) fairness opinion provider,” Mr. Monzon said.

The PSE decided to revisit the guidelines following concerns over the fairness valuation of Melco Resorts and Entertainment (Philippines) Corp. (MRP).

MRP’s largest shareholder, MCO (Philippines) Investments Limited (MCO Investments), had planned to conduct a mandatory tender offer in line with the listed firm’s intention to delist from the PSE.

MCO Investments engaged FTI Consulting Philippines, Inc. for the valuation of MRP’s shares, who priced them at P7.25 per share. The PSE however received several complaints from MRP shareholders, calling the price “unfair.”

“We had that valuation problem in Melco, they were attacking the fairness valuator. A lot of people were agitating for PSE to hire another one, another fairness opinion provider to validate what Melco did,” Mr. Monzon explained.

The PSE executive said they didn’t want to hire another fairness provider because of the nuances in valuation.

“You can value the same company but we can really come up with different answers, it’s an accounting problem,” he added.

While MRP withdrew its plan to file for a voluntary delisting at the PSE, MCO Investments still conducted a voluntary tender offer, citing its intention to consolidate its shareholdings in the firm. After the completion of its tender offer last Dec. 10, MCO Investments now owns about 96.1% of the outstanding capital stock of MRP.

Since MRP has fallen short of the minimum public ownership rule of 10% for listed companies, it will be subjected to involuntary delisting procedures by the PSE.



PSE implements real-time broker ownership monitoring

THE local bourse has implemented new measures that will keep it within the prescribed broker ownership limit, in line with the single industry rule under the Securities Regulation Code (SRC).

The Philippine Stock Exchange, Inc. (PSE) said in a statement over the weekend that it has included real-time broker ownership monitoring through the trading system. This automatically prevents trading participants from placing a buy order for PSE shares should their accounts exceed the 20% limit for broker industry ownership.

Item C of Section 33.2 of the SRC states that “no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange.”

“We intend to observe the prescribed broker ownership limit in PSE by putting in place safeguards that will help us with this goal,” PSE President and Chief Executive Officer Ramon S. Monzon was quoted as saying in a statement.

Other measures include the regular updating of brokerage firms’ Customer Account Information Form, to disclose the relationship of clients to other trading participants, such as the directors, officers, and principal stockholders.

The PSE will monitor the accounts of related persons of broker dealers, including their subsidiaries and affiliates, directors, officers, principal stockholders, and nominees to the PSE, as well as their spouses and relative up to the fourth civil degree of consanguinity.

The exchange has earlier proposed to amend the PSE Rules Governing Trading Rights and Trading Participants, asking trading participants to abide by the Securities and Exchange Commission (SEC)’s Rules Governing Trading of PSE shares.

This entails penalties of up to P300,000, in addition to suspension of trading operations for at least five days for the third and subsequent offense.

“While we have identified the appropriate measures to ensure that broker ownership remains below 20 percent, we call on our trading participants to help and support us in ensuring that the legal requirements are strictly observed,” Mr. Monzon said.

The PSE initiated efforts to bring down broker ownership in 2017, when it was still working on getting the SEC’s approval for its proposed acquisition of the Philippine Dealing System Holdings Corp. (PDSHC).

The PSE-PDSHC merger, however, is not likely to push, through as the state-run Land Bank of the Philippines also intends to purchase the fixed-income exchange with the backing of the Department of Finance. 



PSE still studying if it will give up PDS shares to LandBank

THE Philippine Stock Exchange Inc. (PSE) said it is assessing the reduced offer of state-owned Land Bank of the Philippines (LandBank) to the former’s ownership in the operator of the country’s fixed- income exchange platform.

In its disclosure, PSE said it received a letter from LandBank to buy its shares in Philippine Dealing System Holdings Corp. (PDS) for P215 per share or a total of P281.95 million. LandBank’s offer expires by the end of the month.

“The company is studying the offer and will make a recommendation to the company’s board of directors,” the PSE said.

The PSE owns about a fifth of PDS, the owner of Philippine Dealing and Exchange Corp., which operates the fixed-income trading platform.

LandBank’s offer, however, was lower than its bid of P360 per share, or a total purchase price of P472.11 million, last April as officials said it based its bid on the lower dividend payout of PDS in June to its shareholders that downgraded its valuations.

For most of 2014 and 2015, the PSE was working on the P2.25-billion acquisition for a majority ownership of PDS, or about 66.6 percent.

Things headed south, however, when the PSE has asked the SEC for its approval, hoping to secure its nod in November 2015.

In 2017, PSE re-started its bid to acquire most of PDS, with the intention of owning both the equities and fixed-income exchange platforms. The state-owend bank, chaired by the secretary of finance joined the fray on the same year, also offering to buy a controlling stake in PDS.  


I was surprised to read that it was incorporated in 1992. I thought that it would have been incorporated earlier. The stock exchange of a country is very important for the financial point of view. What do you think is the most important aspect of any stock exchange?

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