Lessons from the Calata case

Not every story has a good ending. The ones about love and money almost always leave somebody’s heart torn into pieces. The world knows that by now. It’s a harsh truth older than time itself.

The story of Calata Corp. is no exception. There’s a lot of money involved and there isn’t just one person left out in the cold. Instead, many shareholders are broken hearted, concerned about their money after the Philippine Stock Exchange ruled with finality that Calata should be delisted from the official registry of the exchange.

The subject of their ire is now the PSE for delisting the company before it could do a tender offer of shares. Over the past 48 hours, shareholders filled the PSE’s Facebook page with hate messages. And the messages keep pouring in as I write this.

They did not expect the PSE to delist the company even before a tender offer could happen.

What happens if minority shareholders sell after delisting?

First, minority shareholders need to process getting the stock certificates, which is very hard especially for overseas Filipino shareholders.

Second, once a company is no longer listed, the applicable taxes involved in a sale, are the same as in selling real estate, which will be an additional unnecessary expense.

Many investors expected Calata’s delisting to happen, but only after a tender offer.

I broke the story on the company’s plan to do a gradual buyback of shares. Why it hasn’t happened remains a puzzle to me and I feel sorry for the minority shareholders.

I hope the company proceeds with its plan, if it’s the last thing it can to do for the shareholders who believed in it.

Last month, the PSE said they would wait for Calata’s tender offer timetable in order to set the exact delisting date. But this was not what happened.

One investor raised the question in a letter to me, “So, why after rendering a decision on the appeal, the PSE abruptly delisted Calata on Monday?”

“Why is it that the public shareholders feel betrayed instead of protected by the PSE. Who are they really punishing?” the shareholder said.

The chatty Alfred Reiterer also raised a similar question. “How can the PSE restore the trust of Calata shareholders and convince them that they are protected when they invest in stocks listed in the exchange?”

As markets opened on Monday, Calata was no longer part of the roster, stricken off the registry, vanished into oblivion.

The PSE’s side

The PSE, of course, is only doing its job. After being in hot water the past few years for allegedly letting some companies get away with bad corporate governance, the PSE, now headed by the no-nonsense Ramon Monzon, is making sure things have changed for the better.

Surely, it can’t ignore Calata’s violations. The PSE counted 55 violations of non-disclosure rules although Joseph Calata, the company chairman, had repeatedly said this was not intentional.

Calata’s plan

Chairman Calata must have had a busy weekend. When I asked him to comment on the delisting, he simply said it would be business as usual and that his company would just revert to being a private corporation.

Will he plan to list again in other jurisdictions? It’s possible. The plan to buyback shares also remains, but I don’t know for sure when this will finally happen.

The moral of the story

There are lessons to be learned in the Calata story, bitter as they may be. However way we look at it, stock market investing is just like gambling. Sure, making money in the stock market is fun – it’s like getting manna from heaven. I know how it feels, but greed always has a price. Sometimes, you just have to stop yourself from wanting more and get out immediately.

More importantly, you have to know the company you’re investing in and understand its business. You can’t rely on a tipster, who may just have heard the tip from another tipster and another.

It is easy to conclude that stock prices are being manipulated. But is it really the case all the time? Or could it be that investors are the ones being manipulated to buy the shares?

Stock price manipulation has happened and is probably happening as I write this.

In the case of Calata, it’s up to the Securities and Exchange Commission to prove it and win its case. It has already filed a complaint with the justice department against Calata for allegedly making false claims over a P65 billion casino project.

At this time, it’s good to remember the age-old rule in poker – if you’re playing the game and you look around the table and you can’t tell who the sucker is, then it must be you.

Life, in general, is one big gamble, whether you’re investing emotions or you’re investing money. Some, like the gods and spies, can’t distinguish between love and money. As for me, I don’t have enough money to gamble and lose. But I’m reckless with my heart. And that’s even worse.