BUSINESSMAN Lucio Tan is the controlling stockholder of LT Group Inc., the reason the company carries his initials for its corporate name. His holding in LT Group is held by Tangent Holdings Inc., which is unlisted and belongs to his group of companies.
Tangent owns 8.046 billion LTG shares, or 74.356 percent, while foreigners hold 2.569 billion shares, or 23.74 percent of LTG. Together, Tan and his foreign allies combine for total holdings equivalent to 98.097 percent, leaving Filipinos with the remaining 205.942 million LTG shares, or 1.903 percent.
(Filipino ownership of LT Group shares may even be much less than 1.903 percent because on the list of LTG’s top 100 stockholders, many other foreigners are among those who hold certificated shares totaling 7.318 billion.)
Incidentally, LT Group is not the only listed company in which holdings by foreigners, as public stockholders, outnumber those of the locals. There are others that have the same ownership structure and one of them is Ayala Corp. (AC).
In AC, which is controlled by the Zobels, foreigners hold more common shares than Filipinos do. As of Dec. 31, 2014, it listed PCD Nominee Corp. as holder of 160.041 million AC common shares, or 25.84 percent, for foreigners. In addition, Japanese-owned Mitsubishi Corp. holds 63.041 million AC common shares, or 10.183 percent.
Together, Mermac Inc., owner of 303.689 million AC common shares, or 49.026 percent, PCD Nominee and Mitsubishi hold a total of 526.808 million shares or 85.046 percent of outstanding sahres. This means foreigners hold 36.02 percent while Filipinos own 14.954 percent (100 percent minus 85.046 percent). Mermac is the unlisted holding company of the Zobels.
Of course, there is neither a law nor a rule against the ownership profile of LT Group and AC as long as foreigners’ holdings remain at a maximum of 40 percent of outstanding shares, which is what the law requires.
The question here is why foreigners own more shares in LT Group and AC than Filipino investors and in many other listed companies as well. Both fall under the category of public stockholders.
The answer could be in the choice of strategic partners by the majority stockholders. Again, there is no law that prohibits the controlling stockholders from choosing their allies who would surely vote with them and for them during annual or special stockholders’ meetings.
In favor of foreigners
Let us take a closer look at this ownership imbalance between the holdings of foreigners and Filipinos as public stockholders – they are counted as such in public ownership reports (POR). It is possible that this could have been brought about by the 10-percent minimum ownership limit imposed on listed companies by the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE).
From these PORs, try deciphering how listed companies arrive at so much number of public holdings. In a number of PORs, the public own much more shares than the required 10-percent of outstanding but are not represented on the board.
The task of explaining why foreigners’ holdings in listed companies exceed those of Filipinos rests on the SEC and PSE. If there is a need to revisit the rules on initial public offerings if only to correct the public ownership discrepancy, then SEC officials should make the first move as the main market regulator.
The question is why this ownership profile in favor of foreigners has been allowed and seems bound to continue to happen. Is there not enough money that a listed company can raise from Filipino investors? Just because the SEC has become a passive regulator does not mean publicly listed companies should ignore the local investors.
Couldn’t the officials of both the SEC and PSE combine their efforts to encourage listed companies to sell more shares to Filipinos? This is not to suggest the nationalization of initial public offerings. But it is time big business should tap available domestic funds in raising capital before going on road shows overseas in search of foreign strategic partners for a more effective and advantageous capital alliance.