AS investors, the public don’t have a say in the management of any of the companies listed on the Philippine Stock Exchange (PSE). All they care about though is for their holdings to earn dividends at a rate higher than they would make by idling their money in their bank savings accounts.
Besides, under the ownership rule, the public are entitled to own only a minimum of 10 percent of outstanding common shares and not of outstanding capital stock. Why should a company’s majority owners give them more?
That is the rule that renders the public only a tool of big business in avoiding the payment of much higher taxes on their ownership of companies.
This piece, however, is not only about minimum public ownership but also the penchant of the owners of listed companies to include the “approval of certain company issues by 2/3 of outstanding.” Who among company insiders will oppose, say, an increase in authorized capital to two billion shares, when outsiders who are the public own only 10 percent of common shares?
Two-thirds of what?
Here is an example of how a listed company cites the ownership of its majority stockholders in approving an increase in its authorized capital stock.
On December 8, Loadstar Investment Holdings Corp. will hold its annual stockholders’ meeting. In a filing, the company said it would “undertake to increase its authorized capital stock to implement an approval made at the 17 December 2009 meeting of stockholders.” In that meeting, “at least 2/3 majority of the outstanding capital stock voted in favor of the increase…from P100 million divided into one hundred million shares at a par value of P1 per share to P300 million divided into 3 billion shares at reduced par value of P0.10 per share without preemptive right.”
Forget the other entries in the filing. Instead, try to focus on the required vote of “2/3 majority” to make effective the capital increase.
Who would go against said capital expansion?
While Loadstar reported the public as owners of 579.423 million common shares, or a huge 78.30 percent, it did not say if said ownership also entitles them to control the seven-person board by electing at least five nominees.
PCD as majority owners
PCD Nominee Corp. is Loadstar’s majority stockholder with total holdings of 632.463 million common shares, or 85.468 percent. Filipinos own 620.202 million common shares or 83.811 percent. Foreigners own 12.261 million common shares or 1.657 percent.
How did this happen? How will the public be able to know their fellow owners who are not among the top 100 stockholders? Being a listed company, Loadstar should name its majority stockholders and not hide them behind PCD Nominee.
Of course, Loadstar would argue that it only had two “principal/substantial stockholders” in a public ownership report as holders of a total of 160.533 million common shares, or 21.68 percent, as of October 7. These were Renato L. Reyes with 85.452 million common shares or 11.54 percent, and Jerry C. Angping with 75.081 million common shares or 10.14 percent.
Incidentally, Reyes and Angping are not directors of Loadstar. The website of the PSE listed the members of the seven-person board as follows: Antonio V.F. Gregorio 3rd, Chi HoCo, Leonardo S. Gayao, Delfin S. Castro and Ramoncito B. Cabalu, regular directors; and Manuel C. Ong and Felixes G. Latonero, independent directors.
Does the list mean that PCD Nominee elected all seven including the two independent directors, who, in turn, appointed the following officers: Chi Ho Co, president; Delfin S. Castro, treasurer/CFO/assistant corporate information officer; and Venus L. Gregorio, corporate secretary and corporate information officer?
Loadstar is being cited here only as an example of a company that claims to be listed but fails to disclose the identities of its majority stockholders, who elected the company’s five regular directors, and appointed the two independent directors. There could be other listed companies that prefer their majority stockholders to remain secret. Where does this place the full disclosure rule?
Note. I will take up as soon as possible the query of a reader of The Manila Times I named Depressed Investor. I am still in the process of collating postings of SBS Philippines on the PSE website. So far, I have a few documents including the company’s prospectus for its initial public offering. I hope DI and other readers, who include Due Diligencer in their daily reading habit, would bear with my shortcoming.