MORE often than not, insiders are perceived to end up the big winners when they buy or sell shares in their own companies. Is it because they know something is about to happen inside the boardrooms? Not necessarily, although it pays to trade big on advanced knowledge of the agenda of a board meeting.
In the following items based on filings posted on the website of the Philippine Stock Exchange, two insiders bought shares issued by the companies they represent. As required under the rule on full disclosure, they reported their acquisitions.
In a case like this, what should the public do as investors in listed stocks? Should they follow their trades or go against them? Such is the quandary faced by outsiders who do not have any kind of access to anything going on inside the boardrooms.
The following items are about insiders who may have access to limited information. Did they use them?
FLG Management & Development Corp. increased the number of common shares it owns in GMA Network Inc. to 681.2 million, or 20.3 percent, from 680.9 million, or 20.2 percent, with its acquisition of 352,500 GMA7 common shares in November at different prices.
In a series of trades, FLG bought 17,500 shares at P6.13 each, 3,800 shares at P6.14 each, and 19,800 shares at P6.15 each, on Nov. 24; 8,900 shares at P6.12 each, 25,000 shares at P6.14 each, and 136,000 shares at P6.15 each, on Nov. 25; 138,500 shares at P6.15 each on Nov. 28; and 3,000 shares at P6.15 on Nov. 29.
FLG’s trades showed the movements of GMA7’s stock price, which varied from a high of P6.15 to a low of P6.12. The buyer, which is a principal stockholder, bought a total of 297,300 shares at P6.15 and only 8,900 shares at P6.12.
In an earlier filing, FLG reported having bought a total of 1.03 million GMA7 common shares – 62,200 shares at P6.12 each on Nov. 3; 206,800 shares at P6.2060 each on Nov. 4; 752,800 shares at P6.2412 each on Nov. 7; and 11,200 shares at P6.2420 each on Nov. 8.
A director’s acquisitions
Lawyer Ray C. Espinosa, a member of the 11-man board of Manila Electric Co., bought 5,000 Meralco shares in three transactions on Dec. 2: 1,000 shares at P260.20; 2,000 shares at P260.60; and P2,000 shares at P261.
The acquisitions increased to 31,000 the Meralco shares he directly owns.
Aside from his membership in the board, Espinosa is also Meralco’s general counsel, according to a filing posted on the website of the Philippine Stock Exchange.
Espinosa is one of the five nominees to the board of the Indonesian-owned First Pacific Co. Ltd. along with Manuel V. Pangilinan, Jose Ma. K. Lim, Oscar S. Reyes and Napoleon I. Nazareno. Reyes is also the president and chief executive officer of the company.
First Pacific indirectly owns 563.1 million Meralco shares, or 49.96 percent, held by its indirectly owned units such as Beacon Electric Asset Holdings Inc. with 394.1 million shares, or 34.96 percent, and Metro Pacific Investments Corp., 169.06 million shares, or 15 percent.
No inside info
Unluckily for FLG, which are the initials of Chairman Felipe L. Gozon, GMA7 opened trading on Dec. 1, the day after it ended its buy trades, at P6.16, which was also the stock’s session’s high, and fell to a low of P6.15, which was its day’s close.
Even on Dec. 5, FLG traded at P6.15 throughout the session when a total of 173,900 shares were traded.
The fact is, like the public, FLG did not know what was about to happen. Neither did it have advanced information on GMA7’s market performance based on the trading trends that occurred after it stopped buying.
Of course, it can be safely assumed that FLG was in the market only for accumulation of GMA7 shares that it may sell when the stock hits once again its 30-day high of P6.30.
By the way, at P6.30 per share, FLG had a paper wealth of P4.29 billion.
Like FLG, Espinosa also did not make good on his trades despite his being a Meralco director. He even lost when Meralco opened trading at P259. He could have sold at P261.80, the stock’s high, but who could have anticipated such a price.
Meralco went on to drop further to P257.40 and closed the session at P258, which would give Espinosa a paper wealth of close to P8 million.
Considering the trades of FLG on GMA7 and of Espinosa on Meralco shares, who could accuse them of enjoying a big advantage over the public?