Cebu firms still not keen on getting publicly listed

CEBU, Philippines - Although there are profound benefits for companies to enter into Initial Public Offering (IPO) at the Philippine Stock Exchange (PSE), most Cebuano-owned firms are still hesitant to take advantage of the capital market to boost their financial requirements.

“What prevents the SMEs (small and medium entrepreneurs) to join or participate in the stock market are the rigorous requirements of the PSE,” said Rey Calooy president of the Filipino Cebuano Business Club Inc., (FCBC)

Calooy said most of the SMEs here in Cebu are not systematic, while large part of them are single proprietorship and not professionally run. However, he said that when a company decides to enter IPO it could be a good tool to venture into expansion, rather than borrowing capitalization requirement from the banks.

Significantly, Calooy said the FCBC is urging the law makers to pass the pending bill, authored by Senator Manny Villar called “An Act of establishing the small and medium stock exchange or SMEX Act.

If this bill will be passed into law, Calooy said SMEs will be encouraged to get capitalization requirement from the stock market, at the same time professionalizing the some players in the SME sector.

Although, the PSE has already introduce its own program in encouraging the SME sector to go into IPO, SME players still confident that if the SMEX Act will be passed into law, interest will strengthen among the small business players.

Despite the bid of the PSE to attract SMEs, including from Cebu to go into IPO, the stock market is still dominated with large corporations and conglomerates.

The creation of SMEX is seen to broaden and deepen the capital markets by providing both foreign and local investors another window of investment opportunity.

Cebu Business Club (CBC) president Dondi Joseph also said that Cebuano businesses are family-owned and most are organized to the scale of doing business in and around Cebu.

Joseph added that many family-run businesses fell they do not need outside capital at the expense of possibility of losing control of some most of their business.

“I think it also has to do with knowledge of the benefits of going public and how it can turn short lived family businesses into sustainable corporations,” Joseph said.

In a separate interview with PSE president and chief executive officer (CEO) Hans Sicat, he said that his office implementing several programs to develop entry of more SMEs to the stock market.

Sicat said the reason why PSE has opened a satellite office in Cebu, is to encourage Cebu-based businesses to go public and find alternative capital resources in the dynamic equity market.

He said the PSE’s SME Board was purposely created with lesser and relaxed requirements to encourage young companies and SMEs to public.

“A lot of SMEs are not aware that raising capital in the stock market is much easier than going to the bank,” he said.

Most of SMEs still have the Filipino pre-disposition that the only source of capitalization are the banks, wherein alternative funding resources are easily available in other channels, such as the capital market.

However, Sicat admitted that PSE still has to intensify its education awareness program for SMEs.

Cebu Chamber of Commerce and Industry (CCCI) president Prudencio Gesta also said that Cebuanos are just too conservative to enter into IPO, which could be due to the unfamiliarity with the ins and outs of the trade.

Gesta hopes to make strong partnership with PSE in order to provide educational awareness for Cebu-based SMEs the benefits of going public.