On Capital Markets Financing

I recently attended a seminar hosted by FINEX Corporate Finance Committee titled ”CAPITAL MARKET FINANCING: WHAT, WHY AND HOW?”

 

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Basically, the seminar laid out the steps that corporations need to undertake in order to raise funds they need from the public. There were speakers from the investment banking industry that tackled what corporations need to know if they wish to access funds either via debt or equity. Interestingly, there was also a representative from PHILRATINGS who discussed the purpose of Credit Ratings, as well as the fees and processes for a corporation to get an issue and issuer rating. The CFO of First Gen even shared their experience, both in going public with the PSE, and in raising debt for the purpose of getting their stake with EDC despite the surprise exit by their supposed joint venture partner from Iceland. Later on, I will willingly share some of the inputs I got in this blog, as there were just too many information from the seminar.

However, there were two questions raised or challenged by one of the speakers, Mr. Eduardo V. Francisco (BDO Capital President), to the audience. This is worth contemplating.

• For the case of  companies whose funds will be used for future infrastructure projects, how come the PSE does not allow these companies to issue forward looking statements or at least projections for the retail investing public? Recall that in public documents such as prospectus, the issuer is not allowed to release forward looking statements or projections, as well as to show these during roadshows. However, the big investors may privately have access to these projections, or at the very least, have capabilities to come up with one. Mr. Francisco believes that it is quite unfair and that there’s more room for misguidance on the part of the retail investor.
• Mr. Francisco also said that if a company wishes to raise funds and has a good story, it is better to undergo initial public offering (IPO) rather than backdoor listing, because in effect, total costs that will be incurred in an IPO is just almost the same as the total costs that will be incurred in backdoor listing, that is if we include post-backdoor listing activities such as issuance and listing of new shares, etc. However, IPO requires timing in order for an IPO to be marketable. Thus, his question was, if you are a company that wishes to raise funds in an IPO and you have a good story to tell, but your peers in the exchange have P/E that are way below your fundamental P/E, what would you do?

Indeed, appreciating the Capital Markets is really challenging.