Corporate Watch

Last week Commissioner Ephyro Luis B. Amatong announced that the Securities and Exchange Commission (SEC) is now looking at mandating a 20-25% Minimum Public Offering (MPO) range for listed companies, against the November 2017 order for these public companies to hit 15% MPO within three years, then another two years for the final 20% MPO.

It is not three years yet from 2017, and many listed companies have not even climbed up to the 15% intermediate level before settling to 20% MPO. No problem, Mr. Amatong said. “We don’t care how you do it, as long as within five years (until 2024) you’ll have 25%,” he insisted (BusinessWorld, Aug. 13, 2019). There are 68 listed firms to be affected by the increased MPO requirement, with 39 having a public float of less than 15%. Four of the 30 Philippine Stock Exchange Inc. (PSEi) member firms currently have a public float of less than 25%, namely: Aboitiz Power Corp. with 19.15%; Globe Telecom, Inc. with 21.65%; Manila Electric Co. with 20.98%; and San Miguel Corp. with 15.94% (Ibid.).

“The ASEAN standard is 25%… and there’s initial feedback since some companies in their initial offering (IPO) actually go straight to 40%,” Mr. Amatong said to reporters. Listed firms here however, still adhere to the 10% MPO requirement, which has been in place since 2011.

Surely not meant to taunt the announced public float requirement increase but only coincidentally, the next day billionaire Andrew Tan’s casino business, Travellers International Hotel Group Inc. (Travellers), announced on ABS-CBN News that it was voluntarily delisting from the Philippine Stock Exchange (PSE) in October. Travellers, which operates Resorts World Manila (RWM), will hold a tender offer for up to 1.58 billion shares, after which non-public shareholders will hold at least 90% of the total listed and outstanding common shares. Then they will no longer be covered by the SEC order to have 25% public retail investors have a say in their business.

And that is precisely the explanation Travellers gave for the voluntary delisting. “The conversion from a public entity into a private company will allow the company to timely address evolving market demands and rapidly changing customer needs without compromising its business strategies to competition,” Travellers told the stock exchange. Earlier, they reported a 52% drop in net income in the quarter ending June to P600.3 million, as gross expenses rose 89% to P7.37 billion during the same period. Kevin Tan, CEO of holding company Alliance Global, said net income in the January to June period was flat at P12.5 billion as “cost pressures” to address competition shaved margins (ABS-CBN News Aug. 14, 2019). Alliance Global includes property developer Megaworld Corp., liquor subsidiary Emperador Inc., and fast food restaurants under Golden Arches Development Corp., the exclusive franchise holder of the McDonald’s brand in the country.

It was only in May that the PSE warned another casino operator, Melco Resorts and Entertainment (Philippines) Corp., that it will delist the company unless at least 10% of its stock was sold to the public by June 11, a deadline set after the SEC warning of non-compliance with MPO in December 2018. But like the Resorts World case, the City of Dreams owners MCO (Philippines) Investments Ltd. had wanted to voluntarily delist from the PSE since September 2018 and in fact made a tender offer for up to 1.5 billion outstanding common shares held by the public, representing 27.23% of the outstanding capital stock of the corporation, at a tender offer price of P7.25 per share (The Philippine Star, Sept. 11, 2018).

“The listed status was considered as an important tool allowing Melco to raise funds in the Philippine public market, in order to provide capital for expansion and other business plans. However, Melco’s listed status in recent years has not contributed to its ability to raise funds despite considerable efforts and expenses being incurred to maintain its listed status,” Melco said in an e-mail reply to The Philippine Star. The reason for delisting is similar to the reason Travellers gave for unloading its public shares.

The attempt to make Melco private encountered resistance from some 2.1% public stockholders who spurned the tender offer, and the Melco petition for voluntary delisting of the company collapsed in November. By default, Melco Resorts slid below the required minimum public ownership. Thus the PSE warning in May for Melco to up its MPO to at least the 10% original (2011) requirement, and thence to the 20% November 2017 standard, while waiting for the 25% MPO order just given last week.

If Travellers and Melco argue against the MPO since, in their view, the minority public shareholders could be cumbersome to efficient and productive business management, the involuntary delisting proceedings initiated by the PSE against Calata Corp. (CAL) in July 2017 was meant to protect the public shareholders. It will be recalled that just after its listing in 2012, charges were filed against some individuals in Calata for alleged market manipulation (, July 26, 2017).

Calata’s public ownership report to the SEC as of Oct. 4, 2017 showed the public as holders of 350.935 million CAL common shares, or 61.531%, according to columnist Emeterio SD Perez (The Manila Times, Oct. 13, 2017). Six directors of Calata owned 219.406 million CAL common shares, or 38.469%. Why were public stockholders never allowed to elect their nominees to the board of any listed company (when) they were portrayed as the controlling stockholders in a number of public ownership reports, Perez asked?

The PSE said it found that Calata had 29 violations of Section 13.1 of the PSE Disclosure Rules and 26 violations under Section 13.2. Under the Scale of Penalties, the fourth and succeeding violations of the PSE Disclosure Rules constitute grounds for delisting. A company that has once been delisted cannot apply for relisting within a period of five years from the time it was delisted. Directors and executive officers of a company that has been delisted are disqualified from becoming directors or executive officers of any company applying for listing within the same period counted from the time the application for delisting was approved.

In the midst of Calata’s damning disclosure and black-out violations (insider trading), listed seafood and aquaculture firm Millennium Global Holdings Inc. (MGHI) bought 2.5 billion new shares issued following Calata’s increase in authorized capital stock, giving MGHI 81% of the stocks and making it majority owner of Calata, which continues to function as a private entity.

So many questions come up from the SEC announcement mandating 25% public ownership of listed firms within five years. First of all, do we have to do what the “big boys” do, and stay abreast of the ASEAN in business and economics? Are we ready for this mandated 25% MPO, when listed firms are delisted involuntarily for non-compliance, and even voluntarily for claimed better ease of doing business? Is the mandated MPO helping business or slowing it down? Is it helping the minority retail investors, whose rights are not attended to, contrary to the motivation of the whole exercise of a mandated MPO giving these retail public investors the equal access to high-level investment opportunities?

Perhaps the economists in government should impose less intervention, and let the market and the economy grow, as it will, in the pull of the unstoppable global market momentum.


Amelia H.C. Ylagan is a Doctor of Business Administration from the University of the Philippines.