THE Securities and Exchange Commission must act now before it is too late for its officials to do something for the public stockholders who have incurred significant losses from their investment in Alliance Select Foods International Inc. (ASFII). Alliance Select has an authorized capital stock of 2.5 billion common shares, out of 3 billion common shares with a par value of P1 per share. The company became a publicly traded stock after it sold to the public 535.1 million common shares at P1.35 per share in an initial public offering on Nov. 8, 2006.
The stock closed at P0.57 on April 16, 2017, making the public lose P0.78 per share, or 57.778 percent of their investment at an acquisition price of P1.35 per ASFII common share.
In its early years as a publicly traded company, Alliance Select was generous to its stockholders. It distributed as stock dividends 64.177 million common shares on Dec. 17, 2007, and 137.5 million common shares on Jan. 25, 2012.
In selling 430.286 million ASFII common shares at P1.31 per share under a private placement, Strongoak Inc., according to a filing of Alliance Select, ended up owning the equivalent of 28.7 percent of 2.5 billion outstanding ASFII common shares.
By dividing 430.286 million ASFII common shares by 2.5 billion outstanding common shares, Due Diligencer arrived at 17.211 percent of the company’s 2.5 billion outstanding common shares.
“The issuance of the shares resulted in an increase in share capital and additional paid-in capital (APIC) amounting to $9.663 million and $2.974 million, respectively.
Eventually, Strongoak ended up the majority stockholder of Alliance Select in 2015 “owning a total of 1.382 billion shares, representing 55.32 percent of the total issued and outstanding shares of the Parent company.” Again, a computation resulted in Strongoak holding the equivalent of 55.311 percent.
“As of Sept. 30, 2017 and Dec. 31, 2016, additional paid-in capital amounted to $6.6 million,” according to an unaudited quarterly report Alliance Select posted on the website of the Philippine Stock Exchange (PSE).
In the same quarterly financial filing, Alliance Select reported APIC under equity, together with capital stock of $53.646 million, and other comprehensive income of $918,032.
For public investors, the puzzle how Alliance Select could have piled up a deficit of $26.255 million, which, at P52 to a US dollar, would be equivalent to P1.381 billion, despite Strongoak’s additional infusion.
Could the “salaries, wages and other short-term benefits” of $1.772 million in 2017 and $2.036 million in 2016 have caused the huge deficit of Alliance Select? These amounts represented 33.353 percent and 42.438 percent of total “selling and administrative expenses” of $5.312 million in 2017 and $4.798 million in 2016.
It is up to the public to analyze the financial disclosures of Alliance Select and see for themselves how such huge deficits could have happened.
By the way, Alliance Select also reported in its quarterly disclosure short-term benefits of $6.813 million, or 99.062 percent of total benefits of $6.877 million in 2017, and $6.92 million, or 99.018 percent of $6.989 million in 2016.
Generous executive pays
A public ownership report (POR) showed Alliance Select’s ownership profile, with Strongoak at the top, holding 1.383 billion ASFII common shares, or 55.32 percent, according to a company filing. It also listed two other corporate stockholders such as Harvest All Investment Limited, with 177.261 million ASFII common shares, or 7.09 percent; and Victory Fund Limited, with 138.474 million ASFII common shares, or 5.54 percent.
These three stockholders combined for ownership of 1.699 billion ASFII common shares, or 67.95 percent of 2.5 billion outstanding ASFII common shares. In the same POR, Alliance Select attributed to the public 794.059 million ASFII common shares, or 31.77 percent, but are not represented in the seven-person board.
The government is also listed as holder of 346,207 ASFII common shares, or 0.01 percent.
By the way, despite its deficit, Alliance Select paid its chief executive officer, and four others, salaries of P10.723 million in 2014 and P12.998 million in 2015. In addition, the company also rewarded them “bonus/other income amounts” of P891,000 in 2014 and P268,000 in 2015.
These compensations went to Raymond K.H. See, president and CEO; Ma. Cristina P. Ambrocio, general counsel, assistant corporate secretary and compliance officer; Lisa Angela Y. Dejadina, senior vice president for operations; Christopher Paul M. Manese, sales manager; and Edward L. Noma, procurement manager.
Due Diligencer’s take
“The Group does not foresee any cash flow or liquidity problem over the next 12 months,” Alliance Select said in a preliminary information statement (PIS). “It is in compliance with its loan covenant pertaining to debt-to-equity ratio.”
As a result, Alliance Select reported in the same PIS a “625 percent increase in cash and cash equivalents due to the proceeds of the SRO (stock rights offering) in August 2015.”
Alliance Select also said in the same PSE posting the use of the SRO proceeds “to settle outstanding obligations, contributing to the 37-percent decrease in trade and other payables.”
As of May 31, 2017, total liabilities of Alliance Select surged to $28.332 million from $25.808 million. This meant from Dec. 31, 2016 to May 31, 2017, or a five-month period, Alliance Select failed to reduce its liabilities, which, instead, increased by 9.733 percent.
At the same time, Alliance Select said in a report that it had to reduce the par value of its capital stock to P0.50 per share from P1 per share in what is called “quasi-reorganization. It expected the reduction to wipe out its deficit, which had reached $31.999 million as of May 31, 2017.
Alliance Select is undergoing capital restructuring that would effectively reduce the value of the holdings of the company’s stockholders, particularly the public.
Finally, here are two questions for Antonio C. Pacis, chairman, and George Sycip, vice chairman of Alliance Select; and other members of the board, namely, Jonathan Y. Dee, Alvin Y. Dee, Joanna Y. Dee-Laurel, Teresita S. Ladanga, Grace S. Dogilio, Arak Rathborihan, Mary Grace T. Vera Cruz:
Why is Strongoak so silent when it would certainly get hurt financially as Alliance Select’s continue to accumulate deficits?
Why did Alliance Select name only Strongoak and two foreign stockholders from Hong Kong and Singapore in its POR? Just asking.