Treasury shares should be retired

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EMETERIO SD. PEREZ

EMETERIO SD. PEREZ

LISTED companies should be required to retire treasury shares. It is not fair for them to resell what, in the first place, they had sold to the public to raise funds that they needed to improve their financials. To reissue to the same investors at higher prices can never be justified.

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Why should they make money at the expense of the public, who have enabled them to get their shares listed on the Philippine Stock Exchange (PSE)? Being listed and yet, not public, these companies save on tax payments.

Rule may be rules and not even one of them prohibits the resale of treasury shares. This may be true but these rules can be—and must be—changed to stop listed companies from taking advantage of the public by buying them out. In some instances, their reacquisition prices could even be lower than the prices they charged the public when they sold shares under an initial public offering (IPO).

Why don’t these companies instead issue new shares from their unissued capital stock?

Paging SEC
On the other hand, the Securities and Exchange Commission (SEC) should strictly enforce the 10-percent minimum public ownership rule. I have already written a piece about this rule. It is up to the SEC, as the regulatory authority, to strictly implement it by reviewing the list of stockholders posted by listed companies on the PSE website.

How about scrutinizing the holdings that are held by PCD Nominee Corp., which acts only as the record holder for the beneficial owners of shares in listed stocks?

Let me cite an honest ownership disclosure filed with the SEC and the PSE. It should guide other listed companies on how to properly disclose in their filings the beneficial owners, or real owners in layman’s language.

If the public were aware of this particular company’s ownership disclosure, they would certainly want other listed companies to emulate it. I am referring to STI Education Systems Holdings Inc.

Identifying stockholders
STI Holdings has authorized capital of 10 billion shares with par value of P0.50 per share. Of the company’s authorized capital, of 9,904,806,924 shares are paid up.

In an ownership profile, STI Holdings identified Eusebio Tanco either as chairman and/or president of the company’s corporate stockholders, which held 73.2651 percent of the company’s outstanding shares.

As of July 30, PCD Nominee held 3.382 billion shares, or 34.145 percent. The filing did not simply state the number of STI shares it held as record stockholder but named in a footnote the beneficial stockholders as follows:

“Eusebio H. Tanco is the beneficial owner of 211,582,082 shares. Eujo Philippines, Inc. is the beneficial owner of 16,160,000 shares. Prudent Resources, Inc. is the beneficial owner of 1,500,000 shares. STI Education Services Group, Inc. is the beneficial owner of 104,399 shares. Insurance Builders, Inc. is the beneficial owner of 3,000,000 shares. Biolim Holdings and Management Corp. (formerly Rescom Developers, Inc.) is the beneficial owner of 1,005,000 shares.”

Apparently, all these corporate stockholders are owned or controlled by the Tanco group.

Jacob on board
For the public to better appreciate the filing of STI Holdings, I suggest they read the company’s definitive information statement (DIS) which details the company’s ownership profile.

After going over the DIS, a few if not all the public stockholders of STI Holdings would probably ask why other listed companies would not name their beneficial stockholders. Why don’t they identify the actual stockholders when by doing so, the public would know who among them are members of the board?

Perhaps, STI Holdings enjoys a big advantage over other listed companies in having on board lawyer Monico Jacob. It said in a company filing, like Tanco, Jacob has been a “director since 17 March 2010 up to the present.”

Jacob is vice chairman of STI Holdings and chief executive officer of STI Education Services Group Inc. He is also president of STI West Negros University, Capital Management Advisors Inc., Maestro Holdings Inc. (formerly STI Investments Inc.) and Insurance Builders Inc. The list of Jacob’s credentials is too long for Due Diligencer to enumerate in this piece.

Having been an SEC associate commissioner, Jacob surely knows that disclosures should be accurate, relevant and timely. In short, the market’s policy of transparency can be summarized into ART.

esdperez@gmail.com

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