PSE growing wary of backdoor listings

MANILA, Philippines — The Philippine Stock Exchange (PSE), the operator of the local bourse, is growing wary of backdoor listings amid a string of so-called reverse takeovers.

In other countries, backdoor listings have drawn frenzied buying from investors, prompting regulators to tighten rules surrounding this type of listing strategy.

In a briefing on Friday, PSE chief operating officer Roel Refran said that while backdoor listings are allowed, the PSE hopes to see more initial public offerings as these provide more comprehensive information on companies, which in turn could help investors.

“We encourage front-door listings so that the registration process precedes the actual transaction. In the case of backdoor listings, there is a takeover first and then the offering will follow,” Refran said.

He said the traditional or front-door listings help investors make informed decisions compared to backdoor routes.

“The front-door listings allow for information to first be shared to everyone before they can make an investment decision,” Refran said.

In industry parlance, a backdoor listing is a strategy of going public by a company that does not meet the criteria for listing on a stock exchange. To be part of the exchange, the company desiring to go public acquires an already listed company, usually an unsuccessful shell firm.

In recent months, many companies have embarked on backdoor listings. 

These include Okada Manila operator Tiger Resort Asia Ltd. which is doing a backdoor listing through Asiabest Group International Inc .

Tiger is acquiring 200 million shares in Asiabest amounting to P646.5 million via a special block sale on Nov 12. As a result, Tiger shall then obtain two-thirds of the outstanding capital stock of Asiabest, paving the way for Tiger’s backdoor listing.

Another backdoor listing involves IRC Properties Inc., which disclosed on Friday that Aggregate Business Group Holdings has acquired 4.1 billion shares of the company at P1 per piece or P4.6 billion. 

Additionally, the Auspicious One-Belt-One-Road Fund, a Cayman Islands corporation, also acquired 368 million IRC common shares for P404.9 million. 

Dennis Uy’s Udenna Corp. is also doing a backdoor listing through ISM Communications Corp. via a P72 billion share swap. This would pave the way for the listing of his holding company, with ISM to be renamed Udenna Holdings Corp. 

Prior to this, Uy also acquired Philippine H20 Ventures Corp.  which has been renamed as PH Resorts Group., paving the way for the backdoor listing of his casino ventures.