Philippine Stock Exchange (PSE) plans to require
listed companies to disclose an offer price range for follow-on offerings of
common shares. Pending determination of the final offer price the investing
public must be guided by the offer price range in any transaction before the offer
price setting date. Upon filing of the listing application, a listed company will
be required to disclose in the prospectus the offer price range composed of a
minimum offer price and a maximum offer price. The current listing rules do not
require the disclosure of an offer price range for any type of public offering.
By practice, listed companies planning to conduct a public offering indicate
the maximum offer shares and the indicative offer price in their prospectus. Most
investors are not aware that the indicative offer price is the maximum offer
price and the final offer price could be lower than the indicative offer price.
The proposed amendments to the listing rules will be limited to follow-on
offerings of common shares because the minimum offer price is not determined by
the issuer in Initial Public Offerings (IPO), the final offer price is
determined by the issuer in Stock Rights Offerings (SRO) while the final offer
price is not a material consideration in Preferred Shares Offerings (PSO). The
proposed amendments to the listing rules came about when San Miguel Food and
Beverage Inc (FB) filed with the Securities and Exchange Commission (SEC) a
registration statement and preliminary prospectus for a follow-on offering
involving the sale of 887 million common shares with an overallotment of 133.05
million common shares with an indicative offer price of P140 per share for a
total of P142.8 billion. After the indicative offer price was set at an
unreasonable premium the stakeholders adjusted it closer to the market price to
make the follow-on offering marketable to the investing public. The underwriters reduced
the follow-on offering involving the sale of 400.94 million common shares with
an overallotment of 60.14 million common shares with a final offer price of P85
per share for a total of P39.2 billion. This could be uneventful to most
investors but in the midst of the public debate on whether or not to require listed companies to disclose an offer price range for
follow-on offerings of common shares, the bulls make money, the bears make money while
the pigs get slaughtered!
