Listing Procedure and IPO Process

Listing Procedure and IPO
Process
Objectives
At the end of the topic the students must be able to:
1. identify the three methods of listing in the Philippine Stock
Exchange;
2. explain the IPO process;
3. discuss back-door listing;
4. identify the requirements for listing by way of introduction;
5. identify the advantages of listing in an exchange; and
6. differentiate the requirements of the Main board and SME
board of the PSE.
Three Ways of Listing in the PSE
1. IPO (Initial Public Offering)
2. Back-door listing
3. Listing by way of introduction
Essentials of Investments in the Philippine Capital Market

1. IPO
• The Initial Public Offering IPO Process is where a previously unlisted
company sells new or existing securities and offers them to the public
for the first time.
• After an IPO, the issuing company becomes a publicly listed company
on a recognized stock exchange. Thus, an IPO is also commonly
known as “going public”.
IPO Process - A Guide to the Steps in Initial Public Offerings

(IPOs) (corporatefinanceinstitute.com)
1. IPO
• The IPO process
1. Select and investment bank
2. Regulatory filing
3. Pricing
4. Stabilization
5. Transition to market competition

IPO Process
1. Select Investment Bank
• The issuing company to choose an investment bank to advise the company on
its IPO and to provide underwriting services
• Underwriting is the process through which an investment bank (the underwriter) acts as
a broker between the issuing company and the investing public to help the issuing
company sell its initial set of shares

IPO Process
• Types of Underwriting
1. Firm Commitment
2. Best Effort Agreement
3. Syndicate of Underwriters

IPO Process
1. Firm Commitment
• The underwriter purchases the whole offer and resells the shares to the investing
public. The firm commitment underwriting arrangement guarantees the issuing
company that a particular sum of money will be raised.

IPO Process
1. Firm Commitment
• The underwriter does not guarantee the amount that they will raise for the issuing
company. It only sells the securities on behalf of the company.

IPO Process
1. Firm Commitment
• One investment bank is selected as the lead or book-running manager. Under such an
agreement, the lead investment bank forms a syndicate of underwriters by forming
strategic alliances with other banks, each of which then sells a part of the IPO.

1. IPO
• The IPO process
3. Pricing
4. Stabilization

IPO Process
2. Regulatory Filing
• Underwriter must draft the following documents
1. Engagement Letter – a written agreement that describes the business relationship to
be entered into by a client and a company. The letter details the scope of the
agreement, its terms, and costs. The purpose of an engagement letter is to set
expectations on both sides of the agreement.
2. Letter of Intent
3. Underwriting Agreement
4. Registration Statement
5. Red Herring Document

Engagement Letter Definition (investopedia.com)
IPO Process
1. Engagement Letter
2. Letter of Intent – A letter of intent is a document declaring the preliminary
commitment of one party to do business with another

Letter of Intent (LOI) Definition (investopedia.com)
IPO Process
2. Letter of Intent
4. Registration Statement – The registration statement consists of information regarding
the IPO, the financial statements of the company, the background of the management,
insider holdings, any legal problems faced by the company, and the ticker symbol to be
used by the issuing company once listed on the stock exchange.

IPO Process
2. Letter of Intent
• Parts of Registration Statement
1. Prospectus – This is provided to every investor who buys the issued security
2. Private Filings – comprised of information which is provided to the SEC for inspection
but is not necessarily made available to the public

IPO Process
2. Letter of Intent – A letter of intent is a document declaring the preliminary
commitment of one party to do business with another
5. Red Herring Document – A red herring prospectus contains most of the information
pertaining to the company's operations and prospects but does not include key details
of the security issue, such as its price and the number of shares offered.

Red Herring Definition (investopedia.com)
1. IPO
• The IPO process
3. Pricing
4. Stabilization

1. IPO
3. Pricing
• The period when issuing company and the underwriter decide the offer price
(i.e., the price at which the shares will be sold by the issuing company) and
the precise number of shares to be sold.
4. Stabilization
• The period when the underwriter has to provide analyst recommendations,
after-market stabilization, and create a market for the stock issued.
5. Transition to Market Competition
• During this period, investors transition from relying on the mandated
disclosures and prospectus to relying on the market forces for information
regarding their shares
1. IPO
• The IPO process
3. Pricing
4. Stabilization


• A listing procedure when companies buy and reorganize a listed
company, in effect bypassing the IPO process thus saving time and
money.


3. Listing by way of Introduction
• The company is listed even before its shares are offered to the public.
• Listing by way of introduction allows a company to list its shares with
the PSE without having to sell shares to the public immediately.

3. Listing by way of Introduction
• Five (5) ways for company to qualify under listing by way of introduction
1. The company is already listed in another exchange or it plans to list simultaneously
in the PSE and in another exchange.
2. An unlisted subsidiary of a listed company has become widely held by declaring a
property dividend which is distributed to the shareholders of the listed company.
3. A holding company will list in a place of company or several companies which will
delist at the same time.
4. The company is mandated by law to offer their shares to the public.(commercial
banks planning to become universal banks)
5. The company is registered with the Board of Investments, Philippine Economic
Zone Authority or similar government agencies, and is mandated by law to offer its
shares to the public.


Advantages of Listing in an Exchange
1. Opens-up a good source of capital for expansion.
2. Builds-up image for the company or creates public awareness.
3. Lower transfer taxes.
4. Achievement of market-driven valuation for the firm’s assets.
5. Improves companies credit ratings
6. Expands access to capital
7. Expands business relationships
8. Cheaper sources of funds
9. Publicly listed companies can easily return to the market for additional
funds.
Major PSE Listing Requirements
(Two Boards of the PSE)
Main Board SME Board (Small, Medium and
Emerging)
Companies that will list on the Main Board Companies that will list on the SME Board must
must 1. have an authorized capital stock of P100 million or
1. have an authorized capital stock of at more. A minimum of 25% must be subscribed and
least P500 million fully paid.
2. at least 3 years of operating history 2. have a cumulative EBITDA of at least P15 million,
excluding non-recurring and extraordinary income
3. have cumulative earnings before income and/or loss, for the last 3 fiscal years immediately
tax, depreciation and amortization preceding the application for listing
(EBITDA) of at least P50 million for the
last 3 years prior to listing 3. have a positive EBITDA in at least two of the 3 full
fiscal years immediately preceding the application for
4. have positive stockholders' equity for the listing, including the fiscal year immediately preceding
immediately preceding fiscal year the application
4. have an operating history of at least 3 years prior to
its application for listing
5. needs to demonstrate its stable financial condition
and prospects for continuing growth by submitting,

Listing Procedure and IPO Process

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Listing Procedure and IPO

Essentials of Investments in the Philippine Capital Market

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

IPO Process - A Guide to the Steps in Initial Public Offerings

Essentials of Investments in the Philippine Capital Market

Essentials of Investments in the Philippine Capital Market

Essentials of Investments in the Philippine Capital Market

Essentials of Investments in the Philippine Capital Market

Essentials of Investments in the Philippine Capital Market

Essentials of Investments in the Philippine Capital Market

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