Misled by sales pitch



Due Diligencer received two letters regarding a column about SM Development Corp. (SMDC), a member of the group of companies owned by businessman Henry Sy Sr. and his family.

I am only waiting for the letter senders to email me again if they would want to be identified in one of my columns. At this point, I only have a few questions:

Do the Sys tolerate their sales people to make promises that are meant to be broken?

What could be worse for a buyer of condominium units – or a house buyer – than to find that the developers have used low-quality materials for the project?

“…I am glad that you had educated potential buyers about this project,” one wrote as a warning against acquiring a unit in a condominium developed by SMDC.

Another one even concluded: “Never again will I patronize this developer.” Of course, it would be too late for him to abandon what he and his family now call their home.

Finally, I am grateful to those who include Due Diligencer in their daily reading of The Manila Times.

Zobels’ ALI
The definitive information statement (DIS) of Ayala Land Inc. (ALI) listed Ayala Corp. (AC) as a beneficial stockholder, owning 19.098 billion voting shares equivalent to 68.75 percent of 27.779 billion outstanding voting shares.

The filing divided AC’s holdings into 6.935 billion common shares, or 47.135 percent of 14.713 billion outstanding common shares, and 12.163 billion preferred shares, or 93.09 percent of 13.966 billion outstanding voting preferred shares.

ALI’s posting makes the company an AC subsidiary, even if the Zobels own only 47.135 percent of outstanding common shares. Preferred shares made up for the shortage of common shares to make ALI an AC unit.

ALI’s public ownership report (POR) tells a different story by crediting its public stockholders with 7.658 billion common shares, or 52.049 percent of 14.713 billion outstanding common shares. This is an ownership that makes the public the majority or controlling stockholders.

Computed on ALI’s 19.098 billion outstanding voting shares, ALI’s public stockholders should end up the minority stockholders with their holdings down to 40.098 percent.

The irony of it is that the public ownership that ALI attributed to the public does not extend to the property company’s nine-person board. In their place, the Zobels nominated and elected three independent directors.

Due Diligencer’s take
Preferred shares are liabilities but are treated in a company’s financial reports as part of a company’s capital stock. The definition has even been expanded to grant voting rights to their owners.

Incidentally, only the business owners hold all voting preferred shares. The public investors who trade on listed stocks never enjoy such voting right that exclusively belongs to the majority stockholders.

In not a few instances, public stockholders are classified as the majority stockholders in public ownership reports. Worse, their ownership of non-voting preferred shares is never included in these PORs.

Apparently, business owners consider the public investors as second-rate stockholders. This, despite their contribution to enabling family-owned businesses to get the shares of their companies listed.

How all this continues to happen or is allowed to happen is beyond the public investors’ understanding. The securities law and its implementing rules and regulations (IRR) should be amended to allow them to participate in policy-making efforts that are the exclusive domain of the majority owners.

Perhaps, the SEC and PSE could make the stock market also public by allowing the public stockholders of listed companies to elect their own nominees to the board?

Isn’t it ironic that listed companies only make it appear that the public make up their majority stockholders but whose ownership does not include the right to elect their nominees to the board? Just asking.



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