SEC introduces new cornerstone guidelines to boost investor participation in IPOs

THE Securities and Exchange Commission (SEC) has introduced new guidelines aimed at enhancing investor involvement in initial public offerings (IPOs) within the local market.

Memorandum Circular No. 8, issued on April 11, outlines these guidelines for cornerstone investors in IPOs, the SEC said in a statement on Thursday.

Cornerstone investors are those who commit to purchase a fixed number of shares to get a guaranteed allocation at the final offer price of an IPO.

“Such investors 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 SEC said.

Under the new guidelines, cornerstone investment agreements will be integral to an issuer’s registration statement submitted to the SEC. These agreements must specify the allocation guaranteed to cornerstone investors and be signed prior to the IPO pricing event.

“The cornerstone investor shall firmly commit to purchase the shares, provided that the final offer price falls within the preferred range as agreed upon,” the SEC said.

“The issuer must likewise disclose in its final prospectus certain details about its cornerstone investors, including the number of participating cornerstone investors and their respective profile descriptions; the number and type of securities proposed to be issued or offered to such investors; and other information relevant to the investment,” it added.

The SEC said a cornerstone investor may also have representation in the board of the registered issuer, provided that it owns only the minimum required number of shares for election.

“Information provided to such investors will be the same as what is made available to the public or those contained in the final prospectus,” it noted. — Revin Mikhael D. Ochave