PSE issues draft rules on backdoor listing

MANILA, Philippines – To further promote transparency and protect the interest of the investing public, the Philippine Stock Exchange (PSE) is revising its rules on backdoor listing. 

The PSE posted the draft rules on its site Monday, September 16, urging stakeholders to submit their comments on or before Friday, Sept 20.

“In light of the recent backdoor listings and the clamor from the market to give the public an opportunity to participate in fund-raising initiatives of a company that is backdoor listed, the Exchange is in the process of revising its Backdoor Listing Rules to clarify the circumstances that trigger the application of the rules, as well as to expand the obligations of the listed company,” the bourse said.

The rules require a company to submit a Comprehensive Corporate Disclosure with full details of its planned backdoor listing.

The company will be required to conduct a public offering before it will be allowed to undertake other fund-raising activities. There are no restrictions on the subsequent modes of fund-raising, said the PSE.

Backdoor listing, as defined by the Securities Regulation Code, allows privately-held companies that failed the requirements for board listing to buy, control, take over and/or reorganize listed but dormant corporations “for the purpose of reactivating their shares of stock in the Philippine Stock Exchange.”

The draft rules call for a lock-up period that will prevent shareholders of a backdoor listed firm from selling, assigning or disposing of their shares one year from the listing.

Among the companies that recently conducted backdoor listings include LT Group Inc., the holding company of beer and tobacco tycoon
Lucio Tan, and Lucio Co’s Cosco Capital Inc. The companies were listed through Tanduay Distillers Inc. and Alcorn Gold Resources Corp., respectively.

After their backdoor listings, LT Group and Cosco Capital both embarked on top-up offerings by selling shares only to foreign investors.

Another company that is planning to go public through backdoor listing is Emperador Distillers Inc., the liquor manufacturing unit of Andrew Tan’s Alliance Global Group Inc.

Alliance Global said it is subscribing to 13.5 billion shares of listed firm Touch Solutions at par value. The company will then transfer its shares in Emperador to Touch Solutions.

Touch Solution’s corporate name will later be changed to Emperador Inc. – Rappler.com