Reselling treasury shares

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Emeterio Sd. Perez

SOLID Group Inc. (SGI) listed in a public ownership report (POR) 1.822 billion outstanding common shares. As the principal stockholders, AA Commercial Inc. and AV Value Holding Corp., as of October 2, owned 583.378 million common shares, or 32.027 percent, and 500 million common shares, or 27.442 percent, respectively.

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SGI’s two principal stockholders’ combined ownership of 1.083 billion common shares was equivalent to 59.440 percent

On the other hand, SGI’s nine directors owned, either directly or indirectly, 159.474 million common shares, or 8.751 percent, while four officers held 191.768 million SGI common shares, or 10.525 percent.

The percentages were based on Due Diligencer’s computations. In its own presentation, SGI rounded off the numbers to two decimal places. Computed on SGI’s outstanding 1.822 billion common shares, the publicly owned 386.923 million common shares could have been equivalent to 21.401 percent.

In its POR, Solid Group reported 1.435 billion “total non-public shares,” or 78.759 percent. This left the public with 386.923 million SGI common shares, or 21.24 percent.

Treasury shares

Solid Group reported 2.031 billion as the “number of issued and outstanding common shares” by including 209.433 million treasury shares.

What could SGI’s controlling stockholders possibly do with their company’s treasury shares, which, at P1.44 per share, would fetch a total market value of P301.584 million?

The public stockholders have nothing to rely on for information except disclosures posted on www.edge.pse.com.ph. They wouldn’t know what’s cooking inside the boardroom.

In a quarterly financial filing, SGI reported as follows: “As of December 31, 2016, the Parent Company has issued shares of 2,030,975,000 (with P1 par value), of which, 395,960,704 shares are held by the public. There are 4,309 holders of the listed shares, which closed at P1.22 per share on December 31, 2016.”

This means in three months, SGI’s public stockholders lost 9.038 million shares as a result of the company’s reacquisition of issued common shares. As reported in a POR, the number of SGI common shares owned by the public dropped to 386,922,704 common shares as of Oct. 2 from 395,960,704 as of June 30.

Lim-owned Solid Group

Businesswoman Elena S. Lim and her family are the majority stockholders of Solid Group. While individually holding SGI common shares, they also own AA Commercial and AV Value, which they identified in a definitive information statement (DIS) as their corporate stockholders.

Again, Due Diligencer lifted the following from Solid Group’s DIS for the information of the public on how the Lims control the company: “Ms. Susan L. Tan, Mr. Vincent S. Lim, Mr. Jason S. Lim, and Mr. David S. Lim are the children of Ms. Elena S. Lim and Mr. Joseph Lim, all directors and executive officers of the Corporation.

“Ms. Lita Joaquin, the treasurer of the Corporation, is the niece of Ms. Elena S. Lim. Jonathan Joseph Lim is the son of David S. Lim.

“Other than the ones disclosed, there are no other family relationships known to the Company.”

As the owners, the Lims are also among SGI’s highest paid executives. As a group, Jason S., chairman; Susan S., director, president and chief executive officer; David S., director and senior vice president; Vincent S., director, senior VP and chief financial officer; and Lita Joaquin, vice president and treasurer, were paid P16.85 million in salaries, P2.965 million in bonuses and P1.354 million in other annual compensation.

This year, Jason S. and four other SGI executives will get an estimated P20 million in salaries, P3.5 million in bonuses, and P1.5 million in other annual pays and perks.

Due Diligencer’s take

When a listed company buys back its own listed common shares, should the public investors do likewise?

Due Diligencer had suggested to “follow the leader” since listed companies are known not to retire but to speculate on treasury shares. When the time is ripe, they reissue them either to the public or to their allies.
Whatever happened to the public stockholders’ pre-emptive rights?

It is up to the public to assess the “damage” wrought on them by a listed company’s stock buyback. Is the intention of the insiders to make money? Why not retire the treasury shares that had been bought back from the public?

As of its latest POR filing, SGI reported 209.433 million treasury shares which, it said, cost the company P115,614,380. This translates to an average reacquisition price of 55.204 centavos per share, against the stock’s closing price of P1.44.

The computation placed the company ahead by P185.969 million (209.433 million x P1.44 = P301.584 million minus P115.614 million = P185.969 million).

How long would the public stockholders of any of the 300 or so other listed companies have to wait by investing in SGI common shares?
Just asking.

esdperez@gmail.com

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