THE Securities and Exchange Commission may want to redefine who the public is in determining their ownership of at least 10 percent of outstanding shares. Should the computation include all classes of outstanding shares or only common shares, as is the present practice?
The question is posed here because listed companies base their public ownership reports (PORs) only on common shares. Unfortunately for the public, officials of the Securities and Exchange Commission never bother to even read, much less review, them for possible errors.
In the case of Filinvest Land Inc. (FLI), which is the subject of this piece, the number of shares traded on July 18 totaled 11.254 million, which was 0.11958 percent of the 9.411 billion public owned common shares—too thin to boast about. Filinvest is only one of 300 or so listed companies that regularly file PORs that comprise only common shares.
The authorized capital stock of Filinvest Land, the listed company owned by the Gotianun family, consists of 33 billion common shares with par value of P1, and 8 billion preferred shares with par value of P0.01. FLI said that four stockholders own “100% of the total issued and outstanding common shares.”
On Dec. 31, 2015, FLI listed its stockholders as follows:
Filinvest Development Corp. (FDC) 22.41 billion shares divided into 8 billion preferred shares or 100 percent and 14.41 billion common shares or 59.42 percent;
PCD Nominee Corp (for foreigners in the name of Invesco Hong Kong Limited) 6.774 billion common shares or 27.94 percent;
For individual Filipino stockholders, 2.756 billion common shares or 11.36 percent.
“As of Feb. 29,” FLI said, “6,789,998,938, or 21.05 percent, of the outstanding common shares of the corporation are owned by foreigners.”
Here is an update of FLI’s ownership profile based on 24.25 billion outstanding common shares posted yesterday on the website of the Philippine Stock Exchange and 8 billion voting preferred shares owned by FDC.
With the total outstanding capital stock of 32.25 billion shares, including 8 billion voting preferred shares, FDC’s 22.41 billion shares would control 69.488 percent and not 59.42 percent. The company’s ownership does not include insiders’ individual holdings lodged with PCD Nominee.
In a POR on June 30, FLI attributed the public with ownership of 9.411 billion common shares, or 38.81 percent.
Since FLI based its computation only on common shares, here is another way of presenting public ownership that should include 8 billion voting preferred shares.
Computation based on 32.25 billion shares in the capital stock, the publicly owned 9.411 billion common shares would be diluted to 29.181 percent.
Deducting foreigners’ 6.575 billion common shares, or 20.39 percent, the public would hold 2.836 billion common shares, or 8.794 percent. The SEC rule requires listed companies to have a minimum public ownership of at least 10 percent.
On March 31 Filinvest reported total equity of P56.895 billion. Among the entries under equity are P24.471 billion common shares and P80 million preferred shares. The issuance of common shares resulted in additional paid-in capital of P5.612 billion.
The first quarter filing showed FLI had consolidated retained earnings of P26.716 billion—“consolidated” meaning including those of FLI’s subsidiaries.
As detailed in its quarterly financials, FDC enjoyed a very big advantage over the public for a reason that only SEC official can satisfactorily explain. While FLI sold common shares to public at P1.60 to P5.25 each that resulted in the additional paid-in capital of P5.612 billion, it priced the 8 billion voting preferred shares of the Gotianuns-owned Filinvest Land at P0.01 per share, or no premium at all.
The acquisition of 8 billion voting preferred shares even gave the Gotianuns additional voting percentage of 24.806 percent. It really pays to be an insider and majority stockholder at the expense of the public.
From gmail inbox
Henry Onia, a regular reader of The Manila Times, wondered why I have “written much about SSS” and wanted to know when I would do a similar piece “about GSIS on its investments, directors and their compensations, benefits and perks.” The two acronyms stand for Social Security System and Government Service Insurance System. His suggestion like those of other readers is most welcome. While I could not accommodate yet his request, I can assure him that I have started gathering materials on GSIS for my next Duediligencer. Hopefully, I could finish my research for Friday’s piece.
Lito Anda, another regular reader, also emailed requesting an analysis of a forthcoming initial public offering. Again, I can only promise that I would do as he has requested but I need more time to obtain documents from the SEC.
On a personal note, I wish to thank Myra Lopez, Judy Obispo, Jenine Liban and Ronnie Tarranco of BPI Family Bank-North Avenue Mindanao branch for helping me “uncover” the mystery over a deposit into my savings account with Bank of Philippine Islands. Thru them, I learned that the Social Security System credited a deposit to my savings account but did not inform me about it. The BPI Family staff contacted SSS, which in turn explained the mysterious deposit. Thank you too SSS.
I also thank Ms. Grace Pilias, assistant manager of BPI-Santa Rosa, for trying her best to call up SSS but where no one bothered to answer the phone. Perhaps something was wrong with the telephone line between Santa Rosa and Quezon City.