GENERAL information sheet (GIS) is only one of the many documents that private companies are required to submit to the Securities and Exchange Commission (SEC).
Corporations whose shares are listed on the Philippine Stock Exchange (PSE) must also submit audited quarterly and annual financial reports.
From time to time, Duediligencer will monitor GIS filings of listed companies to inform the public of the ownership of companies in which they may have investments.
To start this series, which can come out only as GIS documents become available, Duediligencer hopes that SEC experts could help in computing the equity ratio (60 percent Filipino and 40 percent foreign) based on the outstanding capital stock of Metro Pacific Investments Corp. (MPIC). Following is a report on the contents of the company’s GIS:
Metro Pacific has authorized capital stock of 49.85 billion shares divided into 28.5 billion common, 20 billion Class-A preferred, and 1.35 billion Class-B preferred shares. The par value of common and a Class-B preferred share is P1 and that of Class-A preferred shares is P0.01 which makes the total capitalization P30.05 billion.
MPIC submitted a GIS to the SEC on May 31 and it was posted on the PSE website on June 28. This GIS showed that Metro Pacific has 37.042 billion outstanding shares divided into 27.91 billion common shares and 9.128 billion Class-A preferred shares. Of the total number of outstanding shares, 1,297 Filipinos owned 27.251 billion shares, or 65.92 percent, while 26 foreigners held 9.791 billion common shares, or 35.08 percent. Filipino-owned MPIC shares are further divided into 18.122 billion common shares and 9.128 billion Class-A preferred shares.
The mystery over the percentage equivalent begins with the outstanding number of shares. In fairness to MPIC and its management, the numbers and percentages given in the GIS may be correct while my reading and interpretation of them may be wrong.
As far as the number of outstanding shares is concerned, MPIC’s addition is correct: 27.251 billion Filipino-owned shares plus 9.971 billion foreigner-owned shares add up as 37.042 billion shares.
Then, MPIC presented Filipino-owned 27.251 billion shares as equivalent to “64.92 percent” while foreigner-owned 9.791 billion shares as “35.08 percent. By adding the two percentages, the company arrived at a total of “100 percent.”
However, how did MPIC come up with 27.251 billion Filipino-owned shares as 64.92 percent, and 9.791 billion foreigner-owned shares as 35.08 percent is a different story.
60-40 ownership ratio
As a rule, to show the 60:40 ownership divide accurately between Filipinos and foreigners in a stock corporation, the outstanding number of shares must be constant and the total number of Filipino-owned shares and the total number of foreigner-owned shares should be divided by the same number of outstanding shares.
PSE website classifies MPIC as a corporation that belong to the 60-40 ownership category. If so, the number—not the peso value—of the shares that foreigners can own should not exceed 40 percent of the outstanding capital stock.
As I have reported in this space, the Supreme Court has made this clear in a case involving the ownership profile of the Philippine Long Distance Telephone Co. In its ruling, the High Court even emphasized that Filipinos should own at least 60 percent of each class of shares and 60 percent of the resulting outstanding capital.
% of what?
What could be the outstanding shares that MPIC used in computing 27.251 billion MPIC shares equals 64.92 percent of outstanding shares? This is the same question that should have been asked how 9.791 billion MPIC shares equals 35.08 percent.
If MPIC used 37.042 billion outstanding MPIC shares, then 27.251 billion Filipino-owned shares would be 73.568 percent, and 9.791 billion foreigner-owned shares 26.432 percent. The two percent equivalents total 100 percent.
Apparently, MPIC used different set of outstanding shares in computing the ownership ratio. When checked by re-computing the numbers, 27.251 billion Filipino-owned MPIC must equals 64.92 percent of 41.976 billion outstanding shares and 9.791 billion resulted from 27.911 billion outstanding shares.
To recheck the results: 64.92 percent of 41.976 billion shares equals 27.251 billion shares and 35.08 percent of 27.911 billion shares equals 9.791 billion. The results tally.
As of May 31, Metro Pacific had 27,913,673,752 outstanding common shares and 9,128,105,319 Class A preferred shares for a total of 37,041,779,071 shares in its outstanding capital stock. (I am not reducing the number of shares to three decimal places to show the actual results of the computations.)
As MPIC’s majority stockholder, Metro Pacific Holdings Inc. (MPHI) is listed in the general information sheet as owner of 13,222,948,170 common shares, or 47.45 percent.
In addition, MPIC credited MPHI with 100 percent ownership of 9,128,105,319 Class A preferred shares. These holdings give MPHI voting power over 22,351,053,489 shares, equivalent to 60.34 percent of 37,041,779,071 outstanding shares.
With such voting power over 60.34 percent of outstanding capital stock, the Indonesian-controlled First Pacific Co. Ltd. elects all the 11 members of MPIC’s board, led by Manuel V. Pangilinan, who MPIC’s president and chief executive officer, and appoints five “independent” directors.
Former Chief Justice Artemio V. Panganiban is one of MPIC’s five “independent” directors. The others are Alfred V. Ty, Lydia B. Echauz, Edward S. Go, and Washington Sycip.
Incidentally, Panganiban had successfully fought for the right of independent directors to avail themselves of MPI’s stock option. He has argued successfully against the SEC’s prohibition for “independent” directors to buy shares under a company’s stock option. (See Duediligencer, April 20, 2014).