Globe Fintech Innovations Inc., also known as Mynt, a unit of Globe Telecom Inc., is challenging the minimum public offer (MPO) rule as it prepares for an initial public offering (IPO) of a stake in e-wallet app GCash this year.
Globe President Ernest Cu told reporters late last week that should Mynt, which owns GCash, push through with its IPO this year, it would be selling only a 10 percent stake in the unit to the public, contrary to the 20 percent rule on MPO.
Cu hopes regulators Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) will relax the 20 percent rule in favor of Mynt.
“We remain very optimistic that the PSE, the SEC will see that this IPO is quite unique in terms of its size, in terms of the interest of the public and the international investors,” Cu said.
The telco official is counting on the favor of the regulators to see things the way Globe and Mynt do in this IPO.
“And that they will see things our way in terms of the need to look at this threshold that has been around for quite some time. We believe it is quite rigid and given where our market’s at, I think it’s in the best interest of everyone if they will consider the reduction in public float,” Cu said.
The IPO is still in the works and is tentatively planned for the second half of the year.
Cu said the company is trying to address a potential private equity “overhang” or the potential dilution to which common shareholders are exposed when stock-based compensation are awarded to them.
“We are working to remove any kind of private equity overhang that may exist today when we go public, as far as who is going to sell down,” said Cu.
“That’s still in the air. You know these things are very fluid, particularly when there’s no definite timeline as of yet in terms of the listing,” he added.
Peter Garnace, equity analyst at Unicapital Securities Inc., said one possible issue with a lower MPO for Mynt will be on its liquidity.
“The main objective behind increasing the MPO requirement was to enhance liquidity, market efficiency and prevent collusion and price manipulation. If GCash receives an exemption, the possibility of listing increases, but it could face concerns on liquidity or even eligibility to be included in the benchmark index,” he said.
“Critics would also argue that reducing the public float contradicts the fundamental purpose of a publicly listed company, which is to provide market access, liquidity, and broader investor participation. Otherwise, if the MPO is strictly imposed, the burden is now with the PSE to improve trading conditions to attract more investors – both local and foreign – to participate in the local market,” he added.
Mynt wants a valuation of $8 billion or about P467 billion when it conducts the IPO — an upside its $5 billion valuation when Mitsubishi UFJ Financial Group invested into the company late last year, according to Garnace.
“Putting things in perspective, the largest IPO in PSE’s history was Monde Nissin Corp. in 2021, raising P48.6 billion for 20 percent of the company. Twenty percent is the minimum public ownership threshold set by the PSE for companies going public since the rule’s implementation in 2020. Also, companies that are included in the benchmark index, PSEi, are subject to the 20 percent MPO requirement,” Garnace said.
“Now that GCash hopes to get a valuation of $8 billion, to comply with MPO, the company needs to raise $1.6 billion (P93 billion), which could be challenging at current market conditions. Although, there are discussions to provide GCash with an exemption to the MPO rule by allowing it to raise 10 percent instead. Thus, the company would only require P47 billion from the local market. This is comparable to Monde’s IPO in 2021,” he added.
The primary challenge for GCash now is to determine a justifiable valuation and IPO price to meet the demand from institutional and retail investors., the Philstocks analyst said.
“I think GCash’s IPO would definitely be a balancing act for the PSE,” he added.
William Mathew Cabangon, president at AAA Southeast Equities, meanwhile said that a “rule change” is necessary if GCash is allowed to list its shares on its own terms.
“While I am not privy to discussions internally at the PSE about amending the rule, I personally don’t think the exchange has to treat the existing rule as a sacred cow.”
“The SGX (Singapore Stock Exchange) for example uses a tiered approach that adjusts the float requirement depending on the company’s market cap. The NYSE (New York Stock Exchange) meanwhile doesn’t have a percentage requirement at all,” he said.
“There are many alternatives to the status quo that the PSE can study rather than just a straight reduction in the float requirement, which I think would make future smaller listings, like those in the SME (small and medium enterprise) board, prone to illiquidity,” he added.
Investment houses are forging an agreement to equally divide among themselves the distribution of Mynt’s IPO shares similar to what was done during Petron Corp.’s listing in 1994.
The Petron IPO attracted 500,000 shareholders with the share allocations chopped into bite sizes to make it affordable for small investors as well as to have more participants in the IPO.
“We are now discussing within the IHAP that maybe we can underwrite the IPO as a club so all houses will be part of it. Just like Petron back in the days when all investment houses were able to participate,” said Jesus Mariano Ocampo, IHAP (Investment House Association of the Philippines) corporate secretary and managing director at Investment & Capital Corporation of the Philippines.
Ocampo said the GCash IPO will push through in the second half of the year regardless of market conditions.
