SEC urges local business to tap capital markets

SEC urges local business to tap capital markets

CITING the size of Cebu’s financial market, the Securities and Exchange Commission (SEC) hopes to encourage local businesses to consider the issuance of securities to investors as a way to raise capital.

To encourage more local businesses to go public, the SEC held a lecture yesterday for members of the local business chambers, lawyers, accountants and executives from various businesses.

Commissioner Blas James Viterbo said the time was ripe for local businesses to enter into this form of capital financing, pointing out the growth projections for the country, high confidence of international organizations and the stability in inflation and exchange rates. He added that since President Benigno Aquino III’s term began, the SEC has approved P569 billion worth of applications for registration securities, which grew faster than the P599 billion of applications from 2001 to June 2010.

“There is enough cash domestic liquidity in the country to meet the demands for IPOs (initial public offering),” he said.

Rather than let the cash go to investment scams, SEC hopes the money circu- lates and helps fund businesses by being invested in the capital markets.

“People from Cebu, Central Visayas and the Visayas in general have the inherent and tested skills, talent and creativity to take advantage of this opportunity,” said Viterbo.

Viterbo added that SEC’s Cebu Extension Office is the biggest for the commission, processing the most number of corporate registrations and other services outside of Metro Manila.

For the first three quarters of the year, the extension office registered 1,122 new stock corporations and approved an P8.5-billion increase in authorized capital stock applications. Last year, 861 new corporations were registered with the local office, with total paid-up capital of P4.7 billion. It also approved a P7-billion increase in authorized capital stock applications.

He noted that even with the earthquake and super typhoon last year, Central Visayas still managed to grow higher than the national average and is confident Cebu can outpace Manila in terms of financial services.

Cebu Director Lindeza Rogero-Gavi-

no said there was a demand from local stakeholders and professional groups to hold a session, leading them to organize the lecture.

SEC Markets and Securities Regulation Director Vicente Felizmenio discussed the advantages and disadvantages of going public.

Felizmenio admitted that the process of going public is a tedious one, but has its benefits.

For companies that have bigger capital requirements that are beyond what the stockholders or the banks can offer, the capital markets are a good option.

By going public, Felizmenio said businesses can obtain capital in a more efficient way because it would not require collateral and could minimize transaction costs. He said companies that go public also increase the public's awareness of their brand, creating brand loyalty and enhancing its reputation. Offering stock options to employees also lets them provide other forms of compensation.

Those who are uncomfortable with baring all the details to the public are the most unwilling to participate in this capital raising scheme.

Felizmenio admitted that it takes time to prepare, decide and plan to be ready for an IPO. It also requires a whole team dedicated to complying with the requirements.

To assure investors of a company's stability, going public requires the filing of periodic reports on the company's finances, operations, significant business decisions and profiles of the directors, officers and shareholders. Felizmenio added that the management could fall into a trap of meeting the investors' expectations by deciding to go for shortterm gains to spike the prices and end up sacrificing long-term benefits.

Directors and officers are also subject to certain restrictions and lockdowns concerning their stocks. Companies are also a target for acquisition by other entities.

Felizmenio said getting the advice of experts can help a company make the right decision and that the first step is to appoint an investment banker and allow that person to assemble his own team of experts to handle legal, financial, accounting, auditing and taxation matters. He also suggested conducting a review of operations, financial records, structures, policies, practices and to start complying with the Philippine Financial Reporting Standards to make the transition easier.