• Computing 10% minimum public ownership

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    Emeterio Sd. Perez

    DO the general information sheets (GIS) filed by companies with the Securities and Exchange Commission reflect their true ownership profiles?

    For instance, Rockwell Land Corp. attributed to 48,153 stockholders in its GIS, as of April 2017, the ownership of 6.021 billion common shares. By its own computation, Filipino-held Rockwell shares were equivalent to 98.44 percent of outstanding shares.

    Add to this percentage 1.56 percent, or 95.589 million common shares held by foreigners, and you get 100 percent.

    Translated into individual average holdings, Filipinos owned 125,043 Rockwell common shares each. Foreigners got more with average holdings of 9.559 million Rockwell common shares.

    But that was not the correct ratio.

    First Philippine Holdings Corp. was—and still is—the only stockholder that holds 2.75 billion Rockwell voting preferred shares, or 100 percent, along with 5.296 billion common shares, or 86.578 percent. In addition, it also controls the company’s common shares.

    Rockwell is correct in its computation based on 6,116,762,198 outstanding common shares which, for convenience, Due Diligencer shortened to three decimal places or 6.117 billion common shares.

    In its latest public ownership report (POR) as of April 19, Rockwell classified 5.335 billion common shares, or 87.215 percent as non-public and 782.01million common shares, or 12.78 percent, as public.

    10% ownership rule

    The computation of shares owned by the public and reported in PORs should be based on the entire capital stock.

    By doing so, companies that had listed either their entire outstanding common shares or only a fraction of them would be able to show if they were in full compliance with the 10-percent minimum public ownership (10% MPO) rule.

    As has been the practice, the POR computation uses only the outstanding common shares.

    In the case of Rockwell, First Holdings owns 5.335 billion common shares, or 87.112 percent, leaving the public with 782.01 million common shares, or 12.78 percent.

    As the ratio of ownership showed, Rockwell’s public stockholders were ahead by 2.78 percent over the minimum public ownership rule.

    Here is the big BUT. First Holdings also holds 2.5 billion Rockwell voting preferred shares, which a carry par value of only one centavo apiece. Rockwell’s common shares have par value of P1. Based on par value, First Holdings was ahead of the public by 99 centavos.

    Re-computation

    In its latest posting on the website of the Philippine Stock Exchange, Rockwell reported 6.116 billion outstanding common shares. The website did not include 2.5 billion Rockwell voting preferred shares, which would have given the Lopez-owned First Holdings control over 5.335 billion, or 87.23 percent based on an updated computation plus 2.5 billion voting preferred shares.

    Based on this ownership profile, First Holdings’ ownership of 7.835 billion common and voting preferred shares would represent 90.925 percent of Rockwell’s capital stock of 8.617 billion shares.

    On the other hand, the publicly owned 782.01 million Rockwell common shares would be equivalent to 9.075 percent. This would make Rockwell non-compliant with the 10 percent MPO rule by almost one percentage point.

    As the owner, First Holdings enjoyed a much bigger advantage over Rockwell’s public stockholders by denying them their preemptive rights over the issuance of 2.5 billion voting preferred shares.

    What if companies were required to apply the ruling of the Supreme Court on the computation of 60-40-percent ownership of Philippine Long Distance Telephone Co., which has been renamed PLDT Inc., to 10% MPO? The result would be make the public the owners of at least 10 percent of Rockwell’s 2.5 billion voting preferred shares, or 250 million shares. Who knows, this could even vote one of them to the board of Rockwell’s 11-person board?

    esdperez@gmail.com

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