SEC okays PSE rules on backdoor listing

The Securities and Exchange Commission (SEC) has cleared the Philippine Stock Exchange’s rules on backdoor listing, which is expected to cover Baguio Gold Holdings Inc.’s acquisition of flag carrier Philippine Airlines (PAL).

Backdoor listing is a strategy used by companies to get listed on the exchange by acquiring and merging with a corporation already listed on that exchange without going through the long and tedious process of undertaking an initial public offering (IPO).

Under the proposed rules submitted by the PSE, the listing company will pay a listing fee equivalent to one-tenth of one percent of the market capitalization of the new shares covering the transaction.

The market capitalization of the new shares issued should be based on the market price at the time of additional listing of new shares or the transaction price, whichever is higher.

The listed company will also pay a non-refundable processing fee of P250,000 plus other incidental expenses.

The rules also state that the PSE shall allow transactions resulting in a backdoor listing upon compliance with full disclosure of the details of the transactions, suitability requirements for listing, minimum public ownership and continuing listing requirements of the exchange.

"These rules will concurrently apply with the Securities Regulation Code rule on mandatory tender offers and proposed Section 6 of Article V, Part A of the Revised Listing rules when applicable," the PSE said.

The new rules were intended to provide adequate protection to the investing public.

Some companies also consider acquiring a public company as a cheaper means to go public than an IPO.

Baguio Gold, controlled by tycoon Lucio Tan, just recently approved the acquisition of a combined 81.57-percent interest held by six companies in PAL, which would virtually result in the backdoor listing of the nation’s largest carrier on the local bourse.

Baguio Gold is seeking shareholder approval to acquire PAL and to raise its authorized capital stock to P20 billion from P400 million to fund its expansion program. The annual meeting of Baguio Gold is scheduled on Sept. 19.