PSE wants some REIT shares exempt from lock-up

Proposal allows sponsors to sell their holdings during IPO

Keren Concepcion G. Valmonte

THE Philippine Stock Exchange (PSE) is proposing to exempt shares of real estate investment trusts (REIT) issued and sold to their sponsor company from the existing lockup rule.

REITs are subjected to the same guidelines under Section 2(a) of Article III of Parts D and E of the PSE’s listing and disclosure rules.

The rule states that shares bought and paid for in full at a price lower than the offer or listing price 180 days before the offering period or listing date will be subjected to a lockup period of at least 365 days from full payment.

It prevents sponsors from selling their shares via secondary offering through the initial public offering (IPO), which then does not allow a REIT to comply with the one-third minimum public ownership (MPO) requirement.

A sponsor and the REIT usually enter a tax-free deal where the sponsor acquires a controlling interest in the REIT through its issued and outstanding shares in exchange for some income-generating real estate.

On some occasions, sponsors may be issued shares 180 days before the IPO, where it can also sell its shares via a secondary offering.

The PSE is now proposing to exempt shares issued to sponsors, as long as they were not issued earlier than the 180-day period before the IPO because of regulatory requirements.

The changes will also allow sponsors to sell the exempted shares during the IPO “to the extent that will allow the REIT to achieve the [MPO] requirement.”

“REIT shares, which are covered by this exemption but are not sold during the IPO, shall lose their lockup exemption and be subject to the 365-day lockup counted from full payment,” the PSE said.

The applicant company will be required to submit all the necessary documents and comply with requirements outlined in the consolidated listing and disclosure rules of the exchange.

The lockup rules will replace the guideline on listing application documents in Section 5 of the REIT listing rules. It also outlines lockup rules for shareholders of companies planning to list REITs at the small, medium, and emerging board of the local bourse.

A copy of the proposed rules may be accessed at the PSE’s website.

Interested parties are invited to submit to the exchange their comments or queries regarding the proposal by May 10.