• Listing shares for convenience

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    Emeterio Sd. Perez

    AREN’T 7,557 Filipinos lucky for owning 638,606,046 shares of the outstanding capital stock of Ayala Corp. (AC)? This translates to an average of 84,505 shares per Filipino stockholder.

    Of 7,557 Filipinos, 6,538 held 403,652,407 AC common shares, equivalent to 47 percent, according to the Zobel-led holding company’s latest general information sheet (GIS) received on May 19 by the Securities and Exchange Commission.

    Based on the same GIS filing, AC’s Filipino stockholders held an average of 61,739 common shares.

    Due Diligencer’s computation of Filipino ownership resulted in much higher 65.029 percent, but based only on 620,726,154 outstanding common shares.

    Before getting the average number of AC common shares owned by each of 6,538 Filipino stockholders, subtract first the Zobel-held AC common shares, which they indirectly own through Mermac Inc.

    Thus, of 403,652,407 AC common shares owned by 6,538 Filipinos, 303,689,196 belonged to Mermac Inc., the unlisted holding company of the Zobels.

    (Note: Outstanding capital stock is composed of all classes of shares such as common shares and preferred shares, whether voting or non-voting. Outstanding common shares, as the classification suggests, refers only to common shares, which are a company’s voting stock.)

    Filipino-owned common shares

    In turn, the Mermac-owned AC common shares represent 75.235 percent of Filipino-owned 403,652,407 AC common shares. The result of the computation leaves 6,537 Filipino stockholders – 6,538 minus one – with 99,963,211 AC common shares, or 15,292 AC common shares each.

    On the other hand, with Mermac-owned common shares, AC’s 6,538 Filipino stockholders would have owned an average 61,739 AC common shares each. To increase the average number of AC common shares at the expense of Mermac would not have been fair to the Zobels.

    Due Diligencer’s presentation of AC’s outstanding capital stock differs from that of the GIS because of the different numbers used in the computation. While the GIS was based on AC’s entire outstanding capital stock including preferred shares, Due Diligencer did a separate computation based on the remaining outstanding common shares in AC that are not held by Mermac.

    More public?

    In a previous piece, I wrote about the GIS not being reliable for its contents for using PCD Nominee Corp. on the list of stockholders. Like the GIS, even the public ownership reports (PORs) posted on the PSE website do not tell the true ownership profile of listed companies.

    If PCD Nominee muddles the GIS list of stockholders by grouping all Filipino stockholders with the majority owners, PORs could even be worse in misleading the public. I have questioned not a few times PORs for wrongly portraying that most listed companies are more public than others.

    How can this be when the ownership of public stockholders has never been translated into at least a membership in the board?

    For instance, AC reported in its POR as of March 31 that it had 620,726,154 issued and outstanding common shares. In summing the report, the company said it had, as of the cut-off date, 616,784,515 listed common shares; 370,941,112 non-public shares; and 249,785,042 shares owned by the public, equivalent to 40.24 percent.

    Computation

    If you are among the public investors who may be curious about AC’s ownership profile, you need to do you own computation to find out how the company arrived at 40.24 percent.

    You only have to look at the top of the POR to discover the numbers used by AC in its computation. Perhaps, you may even do your own computation by adding “the total number of non-public shares – 370,941,112 – and the “total number of shares owned by the public – 249,785,042 equals 620,726,154.” The sum represents AC’s outstanding common shares as reported at the top of the POR.

    You may also ask yourself where AC got 370,941,112 as the number of non-public shares. Of this, Mermac and Mitsubishi Corp, owned 303,689,196 shares and 63,077,539 shares, respectively, or total holdings of 366,766,735.

    The 366,766,735 AC shares owned by Mermac and Mitsubishi plus 2,123,018 AC shares owned by insiders equal 368,889,753 AC shares. Add the 1,396,359 AC shares under ESOWN subscriptions and 655,000 AC shares owned by the board, and you arrive at 370,941,112 non-public AC shares.

    Due Diligencer’s take

    While family-owned and controlled stock corporations list their entire capital stock, they are only doing so to save on cost of issuing shares to themselves. It pays well for a company to have its shares listed on the PSE board even if these are not actively traded.

    If a company has its shares listed, it pays only one half of one percent of the market value of a capital stock, or 0.005 percent, in tax. In case of closed corporations, they are levied 25 percent of the market value of their capital stock whenever they issue shares to themselves.

    “Themselves” as used here refers to family members who get additional shares when a company raises its authorized capital stock to accommodate the additional issuance of shares. Who can question these families if they list the shares issued by their companies even if they use the stock market only for their own convenience? Just asking.

    esdperez@gmail.com

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