Acesite (Philippines) Hotel Corp. is deemed public, based on the fact its 346.1 million common shares, including treasury shares, are listed on the Philippine Stock Exchange. Records found on the website show the company was incorporated on Oct. 1, 1952 and became a listed company on Dec. 5, 1986.
Compare the basic information Acesite provided to the public with the Wellex Group’s postings on its own website, in which businessman William T. Gatchalian, the patriarch, claims to have founded in 1969 a small family-owned business in the plastics industry that what would eventually become Wellex Group Inc. in 1994.
Even Waterfront Philippines Inc., which belongs to the Gatchalian group and which is the majority stockholder of Acesite, was registered with the Securities and Exchange Commission (SEC) only on Sept. 23, 1994 as a stock corporation. How then did it end up the parent company of a hotel chain, including Acesite, which was incorporated in 1952 when the Wellex Group was not yet in existence?
Some significant public stockholders may not care at all about the history of their listed companies but may not tolerate being taken for a ride by the majority owners. In the case of Acesite, for instance, the public may not have known for several years that the firm has been extending short-term loans and advances to a sister company and certain insiders.
To give the public a picture of Acesite’s financials, here are some entries in the company’s financial statements audited by R.G. Manabat & Co., a member of the KPMG group:
Under current assets, “due from a related party—net” totaled P413,450,899 as of Dec. 31, 2014 and P517,609,726 as of Dec. 31, 2013.
A footnote to these entries in the audit reports explained said advances, or short-term loans that became long-term receivables, as “related party transactions.” It went on to identify the borrowers as “WPI, and its key management personnel.”
(Note. Short-term advances should be good for less than a year and not three or even four years.)
What would be more shocking to the public is the revelation in the same financial posting that these “short-term advances” were “non-interest bearing and payable on demand.” Here is what could be the worst scenario that should frighten Acesite stockholders outside the Gatchalian family: the corporate fund Acesite advanced to insiders was “unsecured.”
WPI is Waterfront Philippines Inc., which like Acesite, is also a listed company. As the parent company of Acesite, it owns 192,045,057 Acesite shares, equivalent to a 55.706 percent stake.
Acesite’s consolidated financial statements showed its advances to affiliates and related parties were down at P391,979,963 as of June 30, 2015 from P413,450,899 as of Dec. 31, 2014. What is puzzling about those numbers has nothing to do with payments but with how long Acesite has been generous with its funds to insiders and allied companies.
Due Diligence could only go back to as early as Sept. 30, 2013 and Dec. 31, 2012. Based on available filings, Acesite’s funds that went to “a related party” amounted to P503,849,364 and P572,051,985, respectively. This means Acesite has been engaged in “insider lending” for three years and perhaps, even longer if the company would provide the public with more financial filings for the past years.
It is up to the public, who, according to Acesite’s ownership posting hold 152,692,017 shares, or 44.29 percent, to identify the company’s borrowers. If they could not, then they could seek the help of the SEC in requiring Acesite to fully disclose the identities of its borrowers and how they used the money.
How did the loans of more than half a billion pesos benefit the public who co-own Acesite along with its majority stockholders? When was the last time they received dividends, either in cash or stocks, for their holdings when the company had only P283.881 million in retained earnings as of June 30, 2015, including P12.042 million as the acquisition cost of treasury shares?
The public stockholders have the right to know where their company’s money went. Without these stockholders, Acesite would not be a listed company, and there would be no Acesite shares traded on the PSE. Never mind if Acesite’s share price remained depressed at just above par value of P1. On Sept. 16, it closed at P1.08.
Finally, who will protect the public from being taken for a ride by the controlling families of listed companies? Could they rely on the SEC leadership and PSE management for the protection of their investment?