PSE issues draft rules on backdoor listing

MANILA — The Philippine Stock Exchange has issued draft rules on backdoor listing.

In a memorandum, the PSE said the current rules do not have restrictions in the modes of fund- raising activities of backdoor-listed firms.

"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 with the intent of promoting transparency and ultimately further protecting the interest of the investing public," PSE said.

The draft rules state that a backdoor-listed firm is required to conduct a public offering, before being allowed to conduct private fund raising activities such as private placement and swaps.

Major stockholders of these firms would be required to have up to oneyear lock-up period. This would prevent related parties and new owners from selling, assigning or disposing to their shares.

Several firms recently conducted backdoor listing such as Lucio Tan's LT Group Inc., which was listed through Tanduay Distillers Inc., and Lucio Co's Cosco

Capital Inc., which was listed through Alcorn Gold Resources.

After their backdoor listing, the two companies had top- up offering by selling shares only to foreign investors.

Andrew Tan's Emperado Distillers Inc. is also set to undergo a backdoor listing, through Touch Solutions.

Under the stock exchange's rules, a backdoor listing happens when a listed company acquires, merges or combines with an unlisted company. It also occurs when a listed company is acquired by merging or combining with an unlisted firm, resulting in a substantial change in the business, membership of directors or ownership structure of the company.