• Why the Lopezes own only 40% of EDC common shares



    STOCKHOLDERS of Energy Development Corp. (EDC) will gather on May 8 for their annual meeting. As of record date March 15, 2017, holders of 18.737 billion outstanding unclassified common shares and 9.375 billion unclassified voting preferred shares are “entitled to notice and to vote in the meeting,” the listed company said in a definitive information statement (DIS).

    Listed companies are required to file with the Securities and Exchange Commission and the Philippine Stock Exchange their DIS, which at the same time is posted on the website of the Philippine Stock Exchange.

    In the same posting, EDC said that as of record date, foreigners owned 5.169 billion common shares, which when computed were equivalent to 27.587 percent.

    According to the filing, EDC’s authorized capital stock consists of 27 billion common shares with par value of P1; 15 billion preferred shares with par value of P0.01; and 300 million non-voting preferred shares with par value of P10.

    Of the authorized capital stock, the number of issued shares that remain outstanding was 18.737 billion common shares; and preferred shares, 9.375 billion, or a total of 28.112 billion EDC shares. The company has not issued any of its 300 million non-voting preferred shares.

    Lucky foreigners
    As of March 15, foreigners owned 5.169 billion EDC common shares, according to company’s DIS. When computed, these holdings represent 27.587 percent of 18.737 billion outstanding common shares.

    A public ownership report (POR) showed EDC’s public stockholders owning 9.229 billion common shares, or 49.26 percent – rounded off from 49.2554 percent – of 18.737 billion outstanding common shares.

    By deducting 9.229 billion EDC common shares attributed to the public from 18.737 billion outstanding EDC common shares, the difference of 9.508 billion EDC common shares are non-public, which was what EDC stated in its POR.

    Again, by subtracting 5.169 billion EDC common shares owned by foreigners from 9.229 billion EDC common shares owned by public investors, the remainder gave the Filipino public investors 4.06 billion EDC common shares, or 21.668 percent of 18.737 billion outstanding EDC common shares.

    The series of computations meant foreigners held an advantage of 5.919 percent, equivalent to 1.109 billion common shares, over the Filipino public.

    Not an EDC monopoly
    Lest Due Diligencer be accused of bias against EDC, public investors should know that foreigners also own more common shares than Filipinos in other listed companies. The lists of the top 100 stockholders of listed companies posted on the PSE website confirm this.

    In connection with Due Diligencer’s analysis, the public should read the holdings attributed to PCD Nominee Corp. as record stockholder for beneficial owners. More often than not, it holds more common shares for foreigners than it does for Filipinos.

    For instance, as of Dec. 31, 2016, PCD held 392.636 million common shares, or 32.595 percent, in SM Investments Corp. for foreigners, and 110.643 million common shares, or 9.185 percent, for Filipinos.

    Another example: EDC’s top 100 stockholders’ list showed PCD as holder of 4.857 billion shares, or 17.256 percent, and 4.368 billion shares, or 15.54 percent, for foreigners and Filipinos, respectively. The percentages were arrived at based on 28.112 billion outstanding capital stock consisting of 18.737 billion common shares and 9.375 billion preferred shares.

    Due Diligencer’s take
    Don’t blame the Lopezes for cornering the ownership of all outstanding EDC voting preferred shares through Red Vulcan Holdings Corp. which the family owns. It is the system that allows the Lopezes and other families to maintain their majority ownership through preferred shares. After all, they owned these businesses even before they took them public.

    The Lopezes maintain control of EDC despite owning only 7.5 billion common shares, which at 40.03 percent is way below 51-percent majority ownership. They remain on top of the list of stockholders because they hold ALL 9.375 billion voting preferred shares.

    As holder of 16.875 billion common and voting preferred shares, the Lopez family controls 60.028 percent of EDC’s 28.112 billion outstanding shares. Computing it another way, 40.03 percent plus 100 percent equals 140.03 percent. Dividing the sum by two equals 70.015 percent.

    Of course, the second computation, which I presented here only for the sake of analysis, is wrong. The traditional measurement of control should prevail, that is, 16.875 billion EDC voting shares divided by 28.112 billion outstanding shares equals 60.028 percent, rounded off from 60.027746 percent. Need I write more? Just asking.



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