• PSE’s rights offer at P252 per share is higher than market


    Emeterio Sd. Perez

    ANYONE among the public investors of the Philippine Stock Exchange could have speculated about the plan or plans of the 15-member board of the PSE for a rights offer. Any public investor could have either bought or sold his PSE common shares even before the bourse announced on January 26 the sale of 11.5 million PSE common shares under a stock rights offering.

    Sadly, the public did not anticipate that the PSE would sell additional common shares higher than market. No one knew what each of the 15 members of the board thought. Definitely, not one of the PSE directors would go for outsiders.

    For the sake of the public investors who were puzzled over the pricing of the PSE’s stock rights offering (SRO) at P252, Due Diligencer is showing the stock’s movement from the time of the announcement to the time of pricing, and finally, the closing price of PSE common shares on Monday, Feb. 26.

    On Jan. 26, when the PSE announced a stock rights offering, the stock opened trading at P241, hit a session high of P247, fell to its low of P241, and closed at P245. The following session Jan. 29, PSE common shares started trading higher at P245, peaked at P247, dropped to the day’s low of P245, and closed the session at P247.

    Finally, on Feb. 26, PSE common shares opened at P259, which was the stock’s session’s high, fell to its low of P240, and closed at P248.80.


    Somebody inside the PSE’s boardroom should tell public stockholders who have been actively trading in PSE common shares what happened between Oct. 25, 2017, the date of the PSE’s 15-person board approval, and Feb. 23, 2018, when the offer was priced at P252 each of the SRO’s 11.5 million common shares.

    At P252 per PSE common share, the exchange could raise P2.898 billion. Again, forget the use of the SRO proceeds, which could also change via an amendment, with the approval of the Securities and Exchange Commission.

    As a matter of fact, from the postings, the public investors would have only to speculate that the PSE’s individual members of the board could not agree on the pricing of the SRO. Who among them were against the price and who were for it?

    Why not consider the PSE as a family-owned corporation raising additional capital for new acquisitions? Isn’t this also a major problem encountered by family-owned and controlled businesses that raise capital through an initial public offering (IPO) of either common shares or non-voting preferred shares?

    Getting their companies’ shares listed enables the very rich family owners to save on their tax payments. One-half of one percent of market value for listed stocks and 25 percent of market value for non-listed stocks should spell the difference between being “public” and being “private.”

    As a listed company, like family-owned listed companies, the PSE is also able to save on tax payments.

    With PSE’s rights offer higher than market, at P252, the public could only guess that BDO Capital and Investment Corp. and First Metro Investment Corp. would end up dividing between them 11.5 million common shares.

    Due Diligencer’s take

    The use of a pair of quotation marks in the following sentence is intentional. Strictly speaking, being “public” is a misnomer and does not apply to all listed companies. Most of them remain “private” despite the listing of their common and non-voting preferred shares on the PSE.

    Just look at the member composition of the board of listed companies. If public investors really own at least 10 percent of outstanding common shares, then why are they not represented on the board?

    Ironically, the SEC appears to be very serious in requiring listed companies to allow public ownership of at least 20 percent of their outstanding common shares. This would be good for the public but only if the controlling or majority stockholders who own 80 percent would allow entry for outsiders into the board.

    If, as a regulatory agency, the SEC could impose the rule, it would have every reason to allow the public stockholders of listed companies to elect among themselves their own nominees to the board.

    It seems the SEC prefers independent directors to public investors’ nominees. If this is not true, then it should get rid of the former and install the latter who, after all, deserve the right to a directorship.

    It is up to the SEC to think of ways to give the public what is due them. Why not get rid of independent directors? Just asking.



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