If a company wants to raise capital with ease when financial institutions are reluctant or when economic conditions are ambiguous then the best possible corporate action is to apply for listing by way of an Initial Public Offering (IPO) in which it is required to sell to the public between 20% to 33% of total shares depending on market capitalization. It is worth mentioning that upon and after listing a listed company must maintain a minimum public ownership of at least 20%. Failure to do so will result in it being delisted and will be unable to apply for listing within 5 years of its removal from the Philippine Stock Exchange (PSE). The rationale for adjusting the minimum public ownership upward is to increase market liquidity, decrease market volatility, restrain market speculation and prevent market manipulation. Despite requests from some trading and market participants to lower the minimum public ownership requirement, the Securities Exchange Commission (SEC) remains resolute in maintaining a minimum public ownership of at least 20% for companies applying for listing by way of an IPO, given the value of higher public ownership in enhancing market penetration. A high public ownership will reduce institutional ownership concentration and broaden retail ownership participation which will improve the corporate governance and strengthen the capital market. But after almost a decade of implementing a minimum public ownership of at least 20%, the SEC has softened in its stand by allowing a minimum public ownership of at least 15% as an exemptive relief as long as the companies applying for listing by way of an IPO will comply with the original minimum public ownership threshold within 2 years from listing date. Although this exemptive relief may encourage more companies to apply for listing by way of an IPO, adjusting the minimum public ownership downward would decrease market liquidity, increase market volatility, induce market speculation and hasten market manipulation. Renowned management consultant Peter Drucker whose writings contributed to the philosophical foundations of modern management theory, believes that the greatest danger in times of turbulence is not the turbulence itself but to act with old logic. But this new logic of the SEC may be interpreted as bending the rules without breaking them to accommodate the private interest of the influential conglomerates rather than protecting the public interest of the taxpaying constituents. This is a wrong precedent that may dampen the much-needed retail ownership participation.
