PSE proposes to exempt some funds from lock-up on shares


THE Philippine Stock Exchange (PSE) wants to exempt alternative investment funds (AIF) or their investment firms from lockup rules on shares, provided that they invested in a company prior to its initial public offering (IPO).

“The exchange proposes to exempt shares issued to AIFs or their investment arm within the 180-day period prior to the IPO at a price lower than the IPO from the application of the [existing] lockup rule,” the PSE said.

Current lockup rules state that shareholders who acquired shares 180 days before a company’s public offering or listing date are subjected to a lockup period of at least 365 days from their full payment. This, provided that the shares were transferred and fully paid for at a price lower than its IPO or listing price.

“The shares of AIFs or their investment arm arising from the exercise of their conversion or subscription rights may be subject to lockup and restrict them from making an IPO exit,” the local bourse explained.

Under the PSE’s proposal, shares issued to AIFs or their investment arm will be exempted from the lockup rule as long as the shares issued are “convertible securities, warrants, options or similar instruments” that have been transferred and fully paid for by the AIF or its investment arm at least 365 days before the offer (holding period).

The exception will apply if the AIF or its investment arm is entitled to convert holdings or subscribe to underlying shares during the entire holding period.

It will also be exempted if the AIF or its investment arm plans to sell the exempted shares during the company’s IPO.

Allowing AIFs and or their investment firm to conduct secondary offers during the IPO will make more shares available to IPO investors. This would also prevent a large-scale divestment and as well as a sharp decline in share price.

“Shares of the AIF or its investment arm, which are covered by this exemption but are not sold during the IPO, shall be subject to the 365-day lockup,” the PSE said.

The PSE explained that it wanted to revise the rules to allow AIFs or their investment arm to reinvest proceeds of the secondary offering in other firms that could be applying for listing, “potentially setting off a chain of listings and AIF-backed IPOs.”

“The inherent characteristic and purpose of an AIF or its investment arm is to exit when the investee company has already stabilized its operations or when it goes public,” the exchange said.

Comments and requests for clarification on the proposal will be accepted by the PSE via until April 9. — Keren Concepcion G. Valmonte

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