• Backdoor listing for Napoles company

    Emeterio Sd. Perez

    Emeterio Sd. Perez

    JLN Holdings Inc., the name suggested by Due Diligence, may not be a welcome addition to the companies listed on the Philippine Stock Exchange for obvious reason: Janet Lim Napoles, the majority stockholder, is facing a court suit for illegal detention and her bank accounts have been ordered frozen by the Court of Appeals.

    Assuming that JLN Holdings has already been registered with the Securities and Exchange Commission (SEC), it might not make it to the PSE board because it is not at all qualified for listing. Still, it could become a public company and at the same time listed on the exchange without undertaking an initial public offering (IPO) of shares.

    If Napoles really wants to, like any other businessman, she could make her company public not necessarily by IPO but by backdoor listing.

    A number of companies have gained entry to the exchange through the backdoor. They did this by buying out the majority stockholders and by tendering to buy out the public of their holdings, which, per the market’s rule, represent at least 10 percent of outstanding shares.

    Will the PSE allow Napoles to take JLN Holdings public via the backdoor? Why not? If it has allowed others to take their companies public this way, there is no way it would apply the rule differently to Napoles and her company.

    Let us forget about the hassles. Having taken over a listed company, it’s time for Napoles to rename it JLN Holdings Inc. with her as majority stockholder and the public stockholders of the listed company she has taken over as her partners.

    Napoles’ corporate lawyers, who may have exerted extra efforts in buying a listed company, know well how to proceed from here. They could, as suggested earlier, implement the earlier plan of making JLN Holdings a true public company by making the public Napoles’s joint venture partner, which would make them owners of 50 percent of outstanding shares.

    To reduce her holdings, which originally represent 100 percent, Napoles should sell more shares to the existing public stockholders and other investors who are in no way related to her. She could even give away shares for free by donating to charitable institutions to dilute her ownership to 50 percent.

    How about the executive officers of JLN Holdings? With Napoles in jail, who could take her place as president and chief executive officer?

    Napoles should leave everything to the corporate lawyers. She could, in fact, choose 11 of the law firm’s partners to compose the board of directors who would then elect the chairman. Having put everything in place—from forming JLN Holdings to listing via the backdoor—she would be out of the picture.

    Her worries over her businesses would be finally over.

    How certain would Napoles be of the efficiency of the lawyers?

    Don’t forget Edwin Lacierda, who would remain in his post as executive vice president and corporate information officer (CIO), who would be her eyes and ears inside JLN Holdings.

    In addition, he would be busy explaining to the PSE and the Securities and Exchange Commission the sudden 50-percent rise or fall of the price of JLN shares, which would be easy for Lacierda to do.

    As JLN Holdings CIO, Lacierda would bring with him his experience in lying for Malacañang’s temporary occupant. Lacierda had once told journalists that the President had nothing to do anymore with Hacienda Luisita Inc., since the chief executive sold his 1-percent stake in the company.

    Due Diligencer’s research showed Lacierda lying. How could the President sell what he did not own; he was never a stockholder of Hacienda Luisita.

    With his Malacañang orientation, Lacierda would be in good company even in the private sector. He need not fear dealing with the public in explaining the “unusual” surge and plunge of JLN Holdings. He would learn from his counterparts in other listed companies who could even share with him the pro forma regulatory explanation that makes the insiders last to know the reason for a stock’s unusual behavior during a particular session.

    The explanation should sound familiar to Lacierda. Listed companies’ CIOs and other executives tasked to explain their stock’s “unusual” performance lie to protect insiders, who are the top brass, from SEC investigation for potential insider trading.



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