The mid-market opportunity: A call for realism

For the better part of a decade, the Philippine capital market has circled the same debate: why don’t our mid-market companies list? We have analyzed the friction, blamed the costs, and lamented the lack of volume. But perhaps the more productive question today is different and slightly more uncomfortable: under what conditions can a mid-sized firm actually survive the public markets?

The answer is no longer theoretical. While structural challenges remain, the next two to three years offer a credible window for the right companies. But we must replace our optimism with a heavy dose of realism. The market does not need more “orphan stocks” — companies that ring the bell to great fanfare, only to flatline with zero volume because there was no compelling reason for institutions to stay.

To add value and relevance to the equity market beyond the familiar conglomerates, we need to stop looking for volume and start insisting on quality.

THE REALITY OF THE “MIDDLE GROUND”
We must be honest about the terrain. The market backdrop is unforgiving. For a company valued between P1.5 billion and P5 billion, the path is narrow. This size is often too small to trigger the automated buying of global emerging market funds, yet it is too large to be supported by retail investors alone. This is not a criticism; it is simply the math of our current liquidity.

However, the burden of liquidity does not rest solely on the issuer. We must acknowledge that domestic institutional investors operate under strict benchmarking frameworks, liquidity thresholds, and career-risk constraints that often limit their ability to take meaningful positions in smaller names, even when fundamentals are sound. Post-listing liquidity is therefore not just a failure of supply; it is a structural challenge of demand.

This reality clarifies our mission. The Philippine market does not need dozens of new listings to declare victory. It needs a small number of issuers brave enough to bridge this gap. We need companies that are so fundamentally sound that domestic institutions are compelled to look beyond the index and take a position.

FROM “CASHING OUT” TO “BUYING IN”
The most difficult shift is psychological. For too long, an IPO has been viewed as a graduation event or a monetization strategy. In our current high-interest environment, that mindset is obsolete.

Listing is not an exit; it is a capital markets integration strategy. It offers things private equity cannot: permanent capital that never matures and a currency for future growth. But this comes at a steep price. The overhead of being public — the compliance, the reporting, the relentless scrutiny — is a significant tax on a mid-sized P&L.

Companies must be willing to pay this “entry fee” today for the valuation premium they expect tomorrow. If the goal is simply to cash out, the private market is a far kinder venue.

THE PROFILE OF A SURVIVOR
So, who should actually list?

The ideal candidates are not necessarily the most exciting “story stocks.” In fact, in a market weary of speculation, “boring” is often better. We are looking for clarity, not complexity. Investors are looking beyond mini-conglomerates. They want “pure plays.” If an investor wants exposure to logistics, they want a logistics stock, not a holding company that owns a warehouse, a bank, and a farm.

This is not a game for everyone. The mid-market firms that will succeed are those that dominate a specific niche, whether that is consumer finance, logistics, specialized healthcare, or industrial services. They must generate the kind of predictable cash flow that allows investors to sleep at night. Only certain business models with visible cash flows and proven operating leverage are structurally compatible with public markets in the near term.

Furthermore, these companies must be professionalized before they ring the bell. The “dynasty” model of management, where a single founder makes every decision, is a red flag to institutional capital. The companies best positioned to list have already built the necessary infrastructure: a credible CFO and uncompromising independent oversight and controls.

THE HARD TRUTHS OF VALUATION AND CONTROL
Finally, we must address the two elephants in the room: price and control.

There is a tendency for founders to look at the trading multiples of the giants and expect the same. But valuation discipline beats valuation ambition. A mid-market firm cannot demand a conglomerate premium. Pricing for perfection effectively ensures a stagnant aftermarket. More fundamentally, mispricing is rarely just a tactical error; it often signals a deeper misalignment between founder expectations and the harsh realities of public ownership. It is a bitter pill to swallow, but a slightly lower IPO price that gives decent upside for investors is the only way to build a loyal shareholder base. You are not “leaving money on the table”; you are buying liquidity.

Equally important is the design of that liquidity. We have a habit of placing shares with “friendly hands” to protect the share price. But this is exactly what kills trading volume. If no one sells, no one can buy. Sustained trading activity is not created by issuers alone. It depends on a functioning post-listing ecosystem, including ongoing sell-side coverage, viable market-making incentives, and distribution that extends beyond the IPO window. Without these, even well-prepared issuers may struggle. However, issuers must still do their part by accepting the risk of having strangers on their cap table. You cannot build a dynamic market without a real free float.

CLOSING PERSPECTIVE
The Philippine capital market does not need a surge of listings. It needs a few credible mid-market companies willing to do it the hard way: pricing fairly, floating real shares, and prioritizing governance over control.

For the right companies, listing over the next few years is not simply about timing the market. It is about proving they belong in it. That is the real opportunity — not just to list, but to last!

The views expressed herein are the author’s own and do not necessarily reflect the opinion and position of FINEX.

Carlo Enrico B. Lazatin is the 2026 president of the Financial Executives Institute of the Philippines (FINEX) and the Philippine Finance Association (PFA). He is the president & CEO of DES Financing Corp., where he has led business transformation and finance innovation. He champions sustainable growth and public-private collaboration to strengthen the Philippines’ investment climate.