PSE eyes lower preferred share offer floor to boost SME access

By Alexandria Grace C. Magno, Reporter

THE PHILIPPINE Stock Exchange (PSE) is proposing to cut the minimum public offer size for preferred shares to P100 million from P1 billion, as it tries to open the capital market to smaller firms and boost participation.

In a consultation paper dated April 21, the exchange said the proposed changes to its listing rules are meant to “democratize access to the stock market,” particularly for small and medium enterprises (SME) that may not have the scale to meet strict requirements.

“This is double the offering limit under the rules and regulations governing crowdfunding, a platform often tapped by SMEs,” the PSE said.

It is also comparable to the minimum offer size required of small-cap companies applying for an initial public offering (IPO).

To complement the lower offer size, the PSE is also proposing to reduce the minimum number of shareholders required upon listing to 100 from 1,000. The move will ensure that subscription levels remain workable for smaller offerings.

The exchange is likewise seeking to align its public float requirements with Securities and Exchange Commission guidelines, setting the minimum float at 15% to 20% depending on market capitalization. In certain cases, a lower float may be allowed, though not below 12%.

Market analysts said the proposal could significantly expand access to capital for SMEs while introducing new dynamics in pricing and investor behavior.

John Tristan D. Reyes, president of BDO Securities Corp., said the lower threshold would make it easier for smaller companies to raise funds without relying heavily on bank loans or diluting ownership.

“The current P1-billion requirement is too high for many SMEs, so this change helps them transition more easily from private funding to the public market,” he said in a Viber message, noting that broader access to financing could support business expansion and job creation.

But investors might demand higher returns, particularly from smaller or less-established issuers, underscoring the need for strong governance and clear dividend structures, he pointed out.

Marky Carunungan, an analyst at F. Yap Securities, noted that while the move lowers barriers to entry, it does not guarantee a surge in issuance since preferred shares remain credit-driven instruments.

“The change should broaden the issuer base but also introduce wider dispersion in credit quality,” he said, adding that this could lead to greater investor selectivity and more varied pricing.

Under the proposal, the PSE plans to streamline disclosure requirements for issuers listing only preferred shares.

Reporting will focus on events that directly affect an issuer’s ability to pay dividends, while nonmaterial disclosures such as changes in directors or business address will no longer require immediate reporting.

The number of reportable disclosure items is set to be reduced to 29 from 42, while some requirements will be removed or applied on a limited basis.

The exchange is also proposing adjustments to its penalty framework, including simplified fines for disclosure violations and specific sanctions for breaches involving dividend payments and shareholder rights.

The PSE is accepting comments on the proposed changes until May 5, 2026, as it seeks feedback from market participants before finalizing the revised rules.