• The need for full disclosures



    FOOTNOTES are intended to explain certain topics, subjects or unfamiliar phrases in a story. In definitive information statements (DIS) posted on the website of the Philippine Stock Exchange (PSE), more often than not, these are rarely explained.

    Instead, listed companies, as a previous Due Diligencer piece had suggested, don’t always enlighten but sometimes confuse the public, especially when the holdings of the majority or controlling stockholders are lodged with PCD Nominee Corp.

    Even general information sheets (GIS) and their accompanying footnotes are not reliable enough to persuade the public to invest in them. Why, for instance, hide the identities of principal or significant stockholders under “others”? Listed companies should name them, instead of wait for the Securities and Exchange Commission (SEC) to notice their sins of omissions.

    Other listed companies show their knowledge of mathematics by expressing in percent the ownership of common shares held for them by PCD Nominee. Why not relate these percentages by including the number of shares?

    Different percentages
    Some percentages are also misleading if not entirely wrong. For instance, Acesite (Philippines) Hotel Corp. listed in a public ownership report (POR) Waterfront Philippines Inc. as owner of 192,045,057 shares, or 55.7 percent.

    In its own DIS, Acesite credited equal number of shares to the same stockholder but placed the equivalent to 55.49 percent. When recomputed, the resulting percentage was 55.706 percent.

    Of course, there could be nothing more misleading than reporting Waterfront as the biggest stockholder of Acesite Hotel among the top 100 stockholders, but without expressing the number of shares in percent.

    Would the public find the footnotes to Acesite’s DIS more informative?

    Listed companies post on the PSE website their DIS for the public to fully appreciate their role as investors. Without them, the families or group of companies that are the majority stockholders would not have been able to get their businesses listed and save on cost of issuing shares.

    Benefits of being listed
    Without the public, these companies would have stayed as the private stock corporations that they have always been. As such, they would have paid not one-fifth of 1 percent of their market value but 25 percent on issuing shares to the members of their families.

    Thus, getting listed means a lot of money saved for family-owned stock corporations.

    Again, as perhaps other listed companies also do, Acesite reported that as of June 30, 2016, PCD Nominee held 129,529,593 shares, or 37.42 percent, with an explanatory note under Footnote No. 2.

    Footnote No. 2 explained PCD holdings as follows: “Majority holder is the I.B. Gimenez Securities Inc., with 40.11 percent of the total shares. Westlink Global Equities Inc. followed [with]19.89 percent of the total shares. Philippine Int’l Life Insurance Co. Inc. is next at 7.32 percent and the rest of the owners have below 5 percent ownership.”

    Here are the numbers of shares not mentioned in the list above as computed, based on the given percentages owned by the stockholders, against the total number of shares of 129.53 million: 40.11 percent is equivalent to 51,954,320 shares; 19.89 percent is equivalent to 25,763,436 and 7.32 percent is 9,481,566. All in all, the top three beneficial owners of PCD-held Acesite shares held 87,199,322 shares, leaving 42,330,271 shares for Acesite’s other stockholders with “below 5 percent ownership.”

    Due Diligencer’s take
    Acesite is cited here not because of the omissions in its DIS but because the company shows how the use of percentages would prod the public shareholders into doing their own computations. As the owner of a hotel chain, its filing illustrates how it could get away with the full disclosure rules that the SEC should strictly implement.

    Full disclosure rules, as the public should have known it, should be accurate, relevant and timely. A piece about ART, which stands for the first letter of the three adjectives that apply to the full disclosure rules, appeared on Feb. 2, 2014 in this space.

    Incidentally, the footnotes to Acesite’s DIS on PCD-held shares could have been a satisfactory compliance with the transparency regulations that govern the stock market. After all, the SEC does not require the elaboration of the holdings of PCD Nominee as to the identities of the holders or direct beneficiaries.

    Listed companies are required only to report the number of shares lodged with PCD Nominee, which acts only as record stockholder for the beneficial owners. After all, most of these PCD-held shares, in turn, are held by stockbrokers. Why should the public ask for more? Just asking.



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