On PNB’s stock bonus plan and inherited shares

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EMETERIO SD. PEREZ

EMETERIO SD. PEREZ

PHILIPPINE National Bank is a subsidiary of LT Group Inc., a listed company owned by businessman Lucio C. Tan and his family. It has 27 corporate stockholders, which also belong to LT Group.

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Like the LT Group, PNB is also listed on the Philippine Stock Exchange.

The 27 LT Group companies own 747.326 million shares, or 59.827 percent of PNB’s 1.249 billion outstanding shares, which makes the LT Group the bank’s indirect controlling stockholder.

In a definitive information statement (DIS), PNB listed 15 insiders, who hold 14.925 million shares, or 1.195 percent. Mr. Tan directly owns 14.843 million PNB shares, or 1.883 percent. At PNB’s 52-week high of P64.75, he had paper wealth of P1.006 billion, making him the richest in the family-based-only on directly owned PNB shares.

PNB closed trading on Friday at P59.20, which made Mr. Tan a little bit “poorer” with the market value of his PNB holdings down to P878.705 million.

In a public ownership report (POR) as of July 15, PNB attributed to the public the ownership of 262.705 million shares, or 21.03 percent.

Anniversary bonus
In a recent filing, PNB disclosed “the grant of a centennial anniversary bonus in the form of PNB shares of stock to all members and advisors of the PNB Board of Directors, PNB regular officers and employees, and PNB officers under management contract.”

The filing may be easy to read because it illustrates the generosity of Mr. Tan. The problem lies in implementing the “grant of a centennial bonus.” Shares are not given free but are sold.

The lawyers of Mr. Tan may have found a secret formula in gifting PNB’s executives and employees with shares of stock. Unless they disclose it, the public would think that they are being taken for a ride.

Accounting entry
The public stockholders of LT Group-controlled PNB may not even be aware of the disclosure on the grant of shares as bonus to the company’s managers and rank-and-file workers. Being preoccupied with watching the price movements of listed stocks, they forget in the process to read any of the company’s disclosures.

Will PNB’s public stockholders question the bank’s planned stock bonus? By asking PNB, they would understand the significance of the bank’s reward policy that, in the first place, could be intended to promote loyalty.

In short, Mr. Tan is only expressing in kind his rare brand of generosity as an employer.

Well and good for now. What happens when financial filing time comes? How would PNB treat stock bonus as an accounting entry?

Under equity in its financial filing covering the first six months of 2016, PNB reported P49.966 billion as “capital stock” and P31.331 billion as “capital paid in excess of par value.”

Free shares
Note the peso equivalent of PNB’s capital stock. This is the product of 1,249,139,678 x P40 par value. “Capital in excess of par value” is additional paid-in capital,” or APIC for other listed companies.

How then will PNB’s free shares of stock to be classified as an entry under equity?

Even a separate fund to finance the issuance of free PNB shares would be defined as an expense. As an expense, it would have to be accounted for in all financial filings such as in quarterly report when the free shares were issued and in audited financial report at the end of the year.

Personally, I understand the intention of Mr. Tan as a kind employer. There is no question about his motive. The only poser here concerns the mechanics of implementation.

It is up to the SEC and PSE to study PNB’s stock bonus plan. Will they allow the issuance of bonus PNB shares to the bank’s managers and employees at the expense of the public?

Investor’s query
Duediligencer received an inquiry from Eduardo Sallan Jr., a reader of The Manila Times. The letter enumerates the shares listed under the name of his father, who has died without transferring them to him.

The question posed by Sallan may be common among heirs. How would he be able to transfer the shares from his father’s name to his name?

“I don’t have the time to arrange it and my vacation is very short as I have been working in Saudi Arabia,” he wrote. “The cash dividends issued by these companies are all under the name of my father.”

In my email response, I assured Sallan that I would help him. The question how I can answer his query did not immediately come to my mind. My willingness to help him placed me in a quandary whether to seek the help of SEC or PSE experts.

I decided one way to solve my dilemma is to write about Sallan’s predicament hoping lawyer A. Bayani K.Tan, who is an expert in securities, both listed and non-listed, is reading Duediligencer.

Will Atty. Tan help Sallan and others, whose inheritance are shares in listed companies but could not sell them because they are in the names of their parents?

Atty. Tan, by the way, is married to Grace Pulido Tan, who is former chairperson of the Commission on Audit.

esdperez@gmail.com

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1 Comment

  1. mr. tan should not limit his generosity to the pnb officers and employees. he should also grant the centennial anniversary bonus to the public stockholders of pnb. after all, they invested their money in the bank!