Wrong formula in computing public ownership



LISTED companies are not necessarily public. In fact, as I had written in a previous Due Diligencer, they got some if not all their shares listed because of the public. Here I am presenting how listed companies continue to violate regulatory 10-percent minimum public ownership rule.

If listed companies want to qualify themselves as public, they can do so by allowing the public investors to participate in the ownership of ALL classes of shares. They should not limit them to acquiring common shares.

Starmalls Inc. is one such listed company, which is not public. While Starmalls qualifies, under the rules, as a public company, to Due Diligencer it —like other listed companies—does not and will never become public as long as it continues to deprive investors outside its two significant stockholder participation in the company’s preferred shares.

In fairness, however, to the Villars, Starmalls is not the only listed company to compute public ownership based only on common shares. If the public stockholders of other listed companies would want to insist on their right as individual investors, they can do so. The question is, will officials of the Securities and Exchange Commission side with them?

Starmalls Inc is a listed company that credits the public ownership of 867.879 million common shares, or 10.30 percent of 8.426 billion outstanding common shares.

In a public ownership report as of September 30, Starmalls listed two principal stockholders. Vista Land & Lifescapes Inc. owns 7.443 billion shares, or 88.34 percent, while Fine Properties Inc., holds 114.878 million shares, or 1.36 percent. Both corporate stockholders are associated with former Senator Manuel Villar and his wife now Sen. Cynthia Villar.

By deducting the holdings of Vista Land and Fine Properties lodged with PCD Nominee Corp. from 8.426 billion outstanding shares, Starmalls arrived at a difference of 867.879 million shares, which it attributed to the public.

As a result of the computation, the public ownership of Starmalls’ outstanding shares reached 10.30 percent, thereby topping the 10 percent minimum public ownership.

Here is another computation that would show that Starmalls, like other listed companies, is not as public as it claims it is in its public ownership report.

In a quarterly financial filing, Starmalls listed 8.826 billion common outstanding common shares and 2.35 billion outstanding preferred shares. In its POR, it showed 10.30 percent public ownership based only on common shares without considering preferred shares in the computation.

Here is how the percentage of public ownership should have been computed: It should be based on the total outstanding shares of 10.776 billion shares by adding the two classes of shares.

The two classes of shares should be added up and the percentage computation based on the total outstanding 10.776 billion shares.

Computed on 10.776 billion outstanding common and preferred shares, the publicly owned 867.879 million common shares would have been equivalent to 8.054 percent. The dilution to below the 10-percent minimum public ownership resulted from the inclusion of 2.35 billion preferred shares owned by Fine Properties.

Besides, if the public would care to scrutinize Starmalls’ ownership profile, they would find it favorable to the two majority stockholders, particularly Fine Properties which was lucky for having bought 2.35 billion voting preferred shares at par value of P0.01.

Full disclosure
Due Diligencer has been calling on the Securities and Exchange Commission to overhaul the ownership of listed companies to make them also public. With either the parent or majority stockholders in control, the public have no way of checking on the activities of the controlling owners particularly their agenda taken up inside the board rooms.

As a matter of fact, even the presence of so-called independent directors (IDs) does not make for an even playing field. The public remain at the mercy of the majority because IDs are not members of the boards for the full disclosure of issues taken up by the board. Like regular directors, they work for the profitability of listed companies if they don’t act as their legal consultants.

Try asking any IDs if they would be reelected should they not go with the majority votes of their fellow directors. Chances are, they face ouster for failing to “join the team.”

So what should be done to correct the system? Abolish the appointment of IDs, who should instead get elected as nominees of the majority stockholders.



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