• Public ownership reports should include preferred shares

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    Emeterio Sd. Perez

    WHAT do the public investors expect from the two listed oil companies in their financial disclosures? Will they rejoice over the huge net profits disclosed in these companies’ quarterly reports?

    Those who trade on listed shares of either Petron Corp. or Pilipinas Shell Petroleum Corp. may find themselves in a quandary over whether or not they should be happy with the two companies’ profits.

    Such profitability happens at the expense of the public, who may be both consumers and stockholders. As investors, they definitely welcome the two oil giants’ report of retained earnings, which determine a company’s ability to pay dividends.

    Aside from watching the rise and fall of the share prices of the two oil companies, the public also closely monitors the utilization of the two companies’ annual profits reported in audited year-end financial statements.

    Dividends
    How much of their profits do Petron and Dutch-owned Pilipinas Shell distribute as dividends, either in cash or in stock? How much of the latter’s income is repatriated to its parent company?

    Shell Overseas Investments B.V., a unit of Royal Dutch Shell, is the beneficial owner of 890.86 million common shares, or 55.21 percent, of the outstanding common shares of Pilipinas Shell.

    Public investors look forward to reaping the rewards of their investments either by selling at a high the common shares they had accumulated, or by investing more in the two stocks in anticipation of oil price increases.
    However, Due Diligencer is not reviewing the financials of Petron and Pilipinas Shell. Rather, it is focusing on the ownership profiles of Petron and Pilipinas Shell, which, along with Chevron Philippines Inc., make up the Big Three oil companies. The public is advised to surf www.edge.pse.com.ph for the two oil giants’ financial performance.

    Capital stock
    The authorized capital stock of Petron consisted of 9,375,104,497 common shares and 624,895,503 preferred shares, according to a general information sheet (GIS) posted on June 16 on the website of the Philippine Stock Exchange (PSE). Both classes carried a par value of P1.00.
    Of Petron’s authorized capital stock, 9,385,104,497 shares were paid up, of which 9,375,104,497 were common shares. Having fully issued its common shares, the oil retailer has to raise the number of common shares in its authorized capital stock.

    Of the total outstanding capital stock, 147,778 Filipinos own 9,008,442,964 shares, or 95.881 percent, divided further into 8,998,499,629 common shares and 9,943,335 preferred shares owned by 147,700 and 78 Filipinos, respectively.

    While foreigners are allowed up to 100 percent ownership in Petron, only 210 of them hold 376,604,868 common shares, or 4.013 percent. Of their total holdings, 207 own 376,604,868 common shares, while two shareholders own 33,810 preferred series 2A shares and one owns 22,855 preferred series 2A shares.

    POR presentation

    Like other listed companies, Petron is required to file a public ownership report (POR), which is based only on outstanding common shares.

    In some PORs, the public investors are made to appear as significant stockholders. In the case of Petron, their close to 24-percent ownership should have entitled them to at least three seats in the 15-person board. Unfortunately, the public investors don’t.

    Petron listed in its POR three principal stockholders with combined holdings of 7,130,912,221 common shares, or 76.06 percent of 9,375,104,497 outstanding common shares, and 75.981 percent of 9,385,104,497 shares in outstanding capital stock. These are SEA Refinery Corp. which had 4,696,885,564 common shares or 50.1 percent of 9,375,104,497 outstanding common shares; Petron Corp. Employees’ Retirement Fund, 731,156,097 common shares or 7.8 percent; and San Miguel Corp., 1,702,870,560 common shares or 18.16 percent.

    Petron credited the public with ownership of 2,234,953,829 common shares, or 23.84 percent. The rest of the oil company’s common shares were held by company insiders.

    Paging SEC

    Why doesn’t the Securities and Exchange Commission (SEC) review the policies governing listed companies?
    Instead of increasing to 20 percent from 10 percent the number of common shares that the public investors should own, the SEC should first look into the ownership profiles of listed companies to see if they are fully compliant with the 10-percent minimum public ownership rule.

    As Due Diligencer has long suggested, the holdings of PCD Nominee Corp. should be dissected to identify the beneficial stockholders. Why does the SEC continue to tolerate the traditional practice of beneficial stockholders hiding behind PCD Nominee, which acts only as the record stockholder?

    As a regulatory authority, the SEC has the power to impose the rules. If the agency’s officials are really serious in making listed companies public at the same time, they must require the inclusion of preferred shares in the POR presentation.

    Even stockbrokers act as shelters for common shares that are available for trading sans the identities of the beneficial owners.

    Will the SEC, and the PSE too, allow the stock exchange to become a venue for money laundering? Just asking. Due Diligencer will take up Pilipinas Shell in next piece.

    esdperez@gmail.com

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