Cornerstone investment regulations issued by SEC
THE Securities and Exchange Commission (SEC) has finalized rules covering cornerstone investors as part of efforts to stimulate market demand and at the same time ensure fairness during initial public offerings (IPOs).
SEC Memorandum Circular 8, Series of 2024, issued on April QQ but only made available on Thursday, sets requirements for IPOs that have cornerstone investors, or those who get guaranteed allocations at the final offer price.
Specifically, MC 8 defines these as investors “to whom offer shares are preferentially placed with a guaranteed allocation at the final offer price, provided that the final offer price is within the offer price range preferred by the cornerstone investor and agreed with the issuer.”
Not all IPOs have cornerstone investors, and the SEC noted that having such “have been shown to stimulate investor demand in an IPO and have been seen to boost confidence and deliver a positive signal to the market.”
The company seeking to go public, however, should ensure that cornerstone investors do not get more information than what is available to the public in the prospectus.
They should also be identified in the final prospectus, including their “profile descriptions,” the number and type of shares to be issued to them and other relevant information.
The cornerstone agreements covering the share allocations should be signed before or, at the very latest, on the day the offering is priced and must be submitted to the SEC as part of the IPO registration statement.
The cornerstone investor should commit to purchase the shares
at the IPO price, which must fall within an agreed-upon range.
“Each cornerstone investor may have representation in the board of the registered issuer, provided it owns the minimum required shares
for election,” the SEC also said.
The regulator, however, removed a proposed 30-day lockup from the listing date that was included in the draft circular released in January.
Analysts earlier said that rules covering cornerstone investments would help ensure transparency and level the IPO playing field.