INSIDER trades are not necessarily illegal; they may be legitimate as long as they are properly disclosed to the public through postings on the website of the Philippine Stock Exchange.
That’s the rule.
Those who are considered insiders are members of the board, executives, and other company personnel who are privy to anything going on inside the company, particularly inside the boardroom.
However, it is not easy to detect insider trading and investigate anyone suspected of having engaged in an illegal acquisition or sale of listed common shares.
How about the Securities and Exchange Commission (SEC)? How should the public deal with it and its officials?
These are posers that the public may probably want to ask SEC Chairperson Teresita Herbosa but may not have the courage to do so.
What if anyone among the SEC commissioners has at one time or another acted as the legal counsel of any of the 300 or so listed companies?
The suspicion alone could put in doubt the ability of the entire commission – from the chair down to the members of the SEC’s market monitoring team – to regulate the stock market.
Due Diligencer selected some stocks and trading transactions by certain insiders. As the saying goes, let the public be the judge whether the SEC’s rules on disclosures of acquisition or sale of listed shares are enough to protect the interests of the investing public while the insiders enjoy their privileges.
Manuel M. Lopez, a member and vice chairman of the 15-person board of First Philippine Holdings Corp. (FPH), sold 150,000 FPH common shares in seven trades at prices ranging from a low of P67.30 on Oct. 3 to a high of P68 on Oct. 2. The sales reduced the number of his direct shares in FPH to 210,642 common shares. He also indirectly holds 1,061,398, or 0.192 percent, through his wife, Teresa.
First Holdings distributed dividends of P1 per FPH common share on June 2. As of June 30, the company’s consolidated quarterly filing showed retained earnings of P87.504 billion.
On Oct. 6, FPH common shares opened trading at P67.30 and closed the session at P66.95.
On Sept. 21, First Philippine Holdings Corp. (FPH) bought 124,000 common shares in First Gen Corp. in 10 transactions at different prices from a low of P18.70 to a high of P18.96 per common share. As of Sept. 30, the company reported that the acquisitions boosted its holdings in its subsidiary to 2,426,399,759 FGen common shares, or 66.278 percent.
FGen, which uses the US dollar as functional currency, will pay dividends of P0.35 per share on Oct. 30. It last distributed P0.35 in dividends on Sept. 23, 2016.
As of June 30, the company had consolidated retained earnings of $1.031 billion based on an unaudited quarterly financial filing.
On Oct. 6, FGen shares opened trading at P19.48 each and closed the session at P19.02.
Jorge A. Consunji, a member of the nine-person board of DMCI Holdings Inc., reported that the “last change in (his) direct ownership was on Nov. 7, 2014, due to 400 percent stock dividend.” Since then, he said his direct ownership of DMCI common shares has not changed.
On Sept. 28, Consunji bought 730,000 DMCI common shares at P15.72 each through a corporate stockholder. The acquisition increased the number of shares he indirectly owns to 1,898,565 DMCI common shares.
On Oct. 6, DMCI shares opened trading at P15.92 and closed the session at P15.80.
In an explanatory note, Consunji described the corporate stockholder who holds DMCI shares for him as a “controlling stockholder” of DMCI.
Due Diligencer’s take
It is up to the public to either follow or go against the trades by company insiders. By going along with anyone inside the boardroom, they will not be accused of knowing in advance certain information known only to insiders.
After all, they are only following the leaders, who happen to be either executives or members of the board.
The numbers show who or which group may be more knowledgeable about how certain stocks would behave in a given period. The public would be happy, however, to know something in advance before they either buy additional listed shares or sell their holdings.
Insiders’ information may be difficult to come by. It pays to know the stock before anyone engages in any trade.
Definitely, knowing what’s cooking inside the boardroom would give anyone among the public a big advantage over the others. However, outsiders should be wary of the consequences, such as the penalties that await them, if not immediately, perhaps in the short term.
How then should the public react to certain price trends of listed stocks? Well, the answer is still in the fundamentals. Why not monitor the dividend trends before placing any more buy orders? Which among these listed companies don’t waste their retained earnings by idling them among the entries under stockholders’ equity? Just asking.