Misleading public ownership reports



AYALA Corp. (AC) will hold at 9 a.m. today (Friday) its annual stockholders’ meeting. Most of, if not all, the public holders are expected to be present to participate in the election of the members of the company’s seven-person board.

Again, like in the past, the public does not have its own nominees to AC’s board. Their seats have been reserved to three independent directors, who, like the regular directors, are also management nominees.

Like Jaime Augusto Zobel de Ayala, chairman of the board, and his younger brother Fernando, vice chairman, AC’s other five director will also be reelected. They are Yoshio Amano, who represents Mitsubishi Corp., Delfin Lazaro, Xavier Loinaz, Antonio Jose Periquet, and Delfin Lazaro. The last three are AC’s independent members of the board.

AC’s computation

In its definitive information statement, AC listed 819.614 million voting shares divided into 619.614 million outstanding common shares and 200 million voting preferred shares. The other classes of AC’s capital stock are 20 million preferred B series 1 shares; 27 million preferred B series 2 shares.

For purposes of computation, Duediligencer is using only AC’s voting shares.

In an ownership filing, AC credited Mermac Inc. with ownership over 303.689 million common shares, or 37.052 percent and 159.577 million voting preferred shares, or 19.469 percent.

Mitsubishi, on the other hand, owns 63.078 million common shares, or 7.696 percent; and 32.64 million voting preferred shares, or 3.982 percent.

When recomputed, AC arrived at these ratios based on 819.614 million voting capital stock divided into 69.614 million outstanding common shares; 47 million non-voting listed preferred shares and 200 million outstanding but non-listed voting preferred shares.

By the number

To show the public how Mermac and Mitsubishi ended up in control of Ayala Corp., Duediligencer computed separately the common shares and the voting preferred shares they own vis-à-vis AC’s outstanding common shares and outstanding voting preferred shares.As computed, Mermac’s 303.689 million common shares represent 49.013 percent of 619.614 million outstanding AC common shares, and its 159.577 million preferred shares equals 79.789 percent of 200 million voting preferred shares.

Mitsubishi’s 63.078 million common shares and 32.64 million voting preferred shares equal 10.18 percent of 619.614 million outstanding AC common shares and 16.32 percent of 200 million AC voting preferred shares, respectively.

Together, Mermac and Mitsubishi hold a total of 366.767 million common shares and 192.218 million preferred shares. Together, they control 558.985million AC voting shares, or 68.201 percent of 819.614 million outstanding voting shares.

Common shares only

An AC public ownership report (POR) as of Jan. 15 showed the public as holder of 249.162 million shares, or 40.21 percent of 619.611 million outstanding AC shares.

The percentage is too big to be believed but such is not an AC monopoly. Other listed companies do similar computation resulting in a public ownership entitled to a board seat or more but is denied board representation.

How about getting the ratio of public ownership based on the total number of AC voting shares? This would result in a total of 819.611 million voting shares divided into 619.611 million common shares as of date of POR filing and 200 million voting preferred shares.

From 40.21 percent public ownership, the ratio dropped to 30.40 percent.

The percentage could even be diluted to 28.751 percent when 249.162 million AC common shares owned by the public were divided by AC’s 866.611 million outstanding capital stock as of Dec. 31, 2015.

Still non-public

Under the rules implemented by the Securities and Exchange Commission, the public should own at least 10 percent of outstanding shares in a listed company.

The problem with this rule lies in the computation. Should the computation to arrive at 10 percent public ownership be based only on common shares?

It is time SEC officials clarify the 10 percent minimum public ownership rule so as not to confuse both the investing public and the majority stockholders of listed companies.

As has been the practice, PORs are issued but contain computations that are based only on common shares. How about voting preferred shares, which are usually cornered by the majority stockholders.

In fairness to the Zobels, AC is not the only listed company that resorts to issuing PORs that portray the company to be more public than others. Several other companies do likewise but are allowed to go around the rule because SEC officials have not been strictly watching them.



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