David Moille emailed me on Aug. 15, 2019 regarding a publicly traded company. In his letter, he complains against Xurpas Inc. (X), which has 1,871,830,210 outstanding common shares, of which 1,797,700,660 are listed on the Philippine Stock Exchange (PSE). The company’s issued common shares total 1,934,925,852.
The PSE website listed 42.52 percent as Xurpas’ free-float level, referring to a public ownership report (POR) that shows the listed stock is both listed and traded. In its PSE posting, the percentage is equivalent to 795,738,871 common shares.
“I have regularly been trying to ask information about their 2018 audited financial statements and general information regarding their current state of business, but I have never received a reply,” Mr. Moille wrote.
Apparently, Mr. Moille could be preparing for the company’s annual stockholders’ meeting, which he said will be held on Nov. 8, 2019.
“The person in charge of contacts with media and investors never returns my calls or answers my emails. I have the negative feeling that the company behaves like a private company.”
Filing. This piece is for Mr. Moille and other public investors who trade on listed stocks. X may be publicly traded because its outstanding common shares are listed.
My suggestion is for Mr. Moille and other public stockholders of Xurpas to go over the company’s disclosures posted on PSE website.
Some of Xurpas’ filings are obviously intended to satisfy the perception of the public such as quarterly report, which covers the first, second and third quarter of the year. The financial filings cover the fourth quarter and are consolidated in the annual financials, which are audited by their external auditors.
Xurpas titles one of its disclosures “material information/transactions”, which, in its case, reports the results of the company’s board meetings. Specifically, this is a company announcement regarding the Xurpas’ annual meeting on Nov. 8, 2019.
A public ownership report, which I usually shorten to POR, contains a listed company’s report on the number of outstanding common shares. A POR deals only with common shares and does not include preferred shares that carry either voting or non-voting feature.
What happens when a listed company decides to issue, which actually means “sell”, preferred shares?
In most cases, voting preferred shares are either “sold” or issued to business owners.
Amended ownerships. The most important among a listed company’s disclosures concern changes in equity, which are reported in “statement of changes in beneficial ownership or securities.”
Said filings, or disclosures, reveal changes in the number of common shares owned or held by insiders, who are mostly the owners of listed companies.
If only Securities and Exchange Commission (SEC) officials or the regulatory agency’s market monitors would closely watch these changes, which are also named amended ownerships, they would discover either “buy” or “sell” orders are based on insiders’ own sources.
When these changes are amended, they could mean insiders’ knowledge of something about to happen within the listed company. Why these are not properly monitored by regulatory agencies is anybody’s guess.
It is up to SEC to determine how and why trades by insiders are being done by insider executives for their bosses.
Due Diligencer’s take
As regulator, the SEC is mandated to regulate listed common shares of publicly traded common shares. As regulator, its main function is to closely watch the stock market’s daily transactions. Any suspicious price movement should be subjected to the closest scrutiny possible, which can be done more efficiently if the SEC would create a department with exclusive jurisdiction over listed stocks.
Creation of such separate department, or even a section within the five-person commission will encourage more public investors to become listed companies’ stockholders. As a matter of fact, trading could be much heavier than it has been in the past. It could also encourage more companies to list their common shares.
I have answered Mr. Moille’s poser regarding Xurpas.
The “list of top 100 stockholders” is not the same as those listed on a POR. The only argument against said list is the use of PCD Nominee Corp., which could be interpreted as one way of hiding the identity or identities of certain stockholders.
Why use PCD Nominee if the owner or owners of PCD-held common shares have nothing to hide from the public.
Being among the buyers or sellers of listed common shares, Mr. Moille could only hope SEC will become an efficient regulator of listed common and preferred shares.
Will Mr. Moille review Xurpas’ postings on PSE?