THE Securities and Exchange Commission is very accommodating of the requests of listed companies to deprive the public of their preemptive rights over issuances of additional shares. Its officials should explain to the public the reason for their “connivance” with the very rich owners of listed companies against individual investors.
As I have been writing in the past, it is the public who are responsible for enabling family-owned stock corporations to list their shares on the Philippine Stock Exchange. Why is it that the SEC and even the Philippine Stock Exchange tolerate the listed companies practice of denying public investors their right to buy additional shares from new issuances?
The SEC follows the policy: The majority rules. But have its officials forgotten that without the public there would have been no PSE for it to regulate even if the stock exchange is a self-regulatory organization? In short, SEC officials would have more time to tour the world.
It may not be easy for the public to understand the regulatory tolerance practiced by the majority stockholders who seek only what’s most convenient for them. Why pay 25 percent of market value of a stock when by listing shares, the owners can save by paying only a tax equivalent to 1/2 of one percent of the market value per share?
In a previous column, I wrote about Starmalls Inc. as being listed but not public because, like other listed companies, it deprives investors of their preemptive rights over preferred shares. (Due Diligencer, Oct. 16).
Of course, Starmalls does not have the monopoly of taking advantage of the public. Other listed companies have also been selling other classes of shares mostly to the majority stockholders but excluding the public. The question is, why? No one, not even any SEC official, has the answer or is willing to consider the question.
It may not be easy to determine which among the listed companies may be guilty of ignoring the right of the public. To identify the violators, it may be time to make an inventory of listed companies that dilute the holdings of the public by issuing shares to their majority owners.
My re-computation of the ownership profile of Starmalls resulted in public ownership of only 8.054 percent, down from 10.30 percent of common shares as shown in the company’s public ownership report.
Review the rule
Aside from Starmalls, there could be others that also apply the 10-percent minimum public ownership rule on common shares only. Because of this, it must be reviewed. At the same time, the SEC should clarify the application of the said rule, whether or not this should also cover issuances of additional common shares and other classes of shares such as preferred shares.
Will PSE take part in any endeavor to protect the preemptive right of the public? Being listed and at the same time enjoying the self-regulatory organization status, it may face a dilemma, which is how it could act as regulator and, at the same time, look into the violation of the preemptive rights of the public by listed companies.
The question then boils down to who between the SEC and PSE should initiate an inquiry in determining whether or not the public as stockholders are entitled to preemptive rights over the issuances by listed companies of additional shares of whatever classes.
Perhaps, SEC officials may want to start auditing the ownership profiles of listed companies. They should make the results of the audits for the sake of transparency.
My own analysis on the preemptive rights of the public over the issuance of new shares of whatever class or classes may also be applied to the sale by businessman Roberto V. Ongpin of 771.652 million shares, or 53.76 percent, that he owns in Philweb Corp.
Philweb has issued 1.392 billion shares with the par value of P1. As of June 30, it reported additional paid-in capital of P1.11 billion. The two added up to total capital of P2.502 billion, which translates to P1.798 per share by dividing P2.502 billion by 1.392 billion shares.
Ongpin’s asking price of P2.60 per share may have topped the issue price per share of P1.798. It did not even approximate the stock’s 52-week low of P3.02; it was lower by P0.42, or 13.91 percent. Against Philweb’s 52-week high of P28.50, his offer to sell at P2.60 was lower by P25.90, or 90.88 percent.
Let me take you to Philweb’s closing price of P8.60 on Monday. Again, Ongpin’s asking price of P2.60 would give the buyer a profit of P6 per share over market.
The last computation should tell the public that as the lone buyer, Gregorio Araneta Properties Inc. stands to gain P6 per share, or a total of P4.63 billion. How about the public? Don’t they deserve similar generous treatment that Ongpin gave the Araneta-owned corporate stockholder?