In defense of PSE

The calls and emails I received last week were from small investors of Holcim Philippines Inc. (HPI) who are up in arms for what they perceive is a betrayal by the Philippine Stock Exchange (PSE) to protect their interests.

The column today will feature the other side of the story in defense of PSE. One is a letter from an investor who apparently has broad knowledge and experience about the ongoings in the stock market. We’ll pick up also salient parts of the PSE press statement giving its side of the ongoing “finger pointing” drama.

The letter writer, Ed Lacson, is a columnist of Daily Tribune and my golf mate for many years. I am quoting below portions of his letter related to the issue (minus those off-the-record side comments and those related to golf).

“I am reacting as a small investor, and as an independent director of various publicly listed companies, including PSE. Your judgment that PSE is heartless in suspending HPI was harsh and off tangent.

“PSE is a rule-based and self-regulating outfit under the direct control of SEC. In its history, it has faithfully adhered to all SEC policies, including mandatory delisting of erring or violating PLCs (publicly listed companies). I personally know how objective and careful PSE is in delisting companies. As a former independent director of PSE, I was a member of the delisting committee.

“I know and I share the anger of the trapped small investors. But they are hitting the wrong party, which is PSE. As a deputized regulator of SEC, it (PSE) will be sanctioned had it not followed to the letter the delisting policy set by SEC.

HPI option

“HPI is aware delisting will expose its small shareholders to higher tax when shares are traded outside the stock market. HPI should have asked BIR for exemption on behalf of its small shareholders.

“HPI clearly dropped the ball on this issue and belatedly engaged in ‘finger pointing’ to show it cares for its small investors.

“In fairness to my former colleagues and PSE, may I suggest you write the side of PSE. This will be your public service for small investors and redirect their ill-advised anger against the rule implementor.”

PSE side

PSE also issued a press statement, which in the interest of space limitations, I am quoting certain relevant portions.

“PSE implemented a trading suspension on HLCM (or HPI) shares after the Company’s public float fell below the minimum public ownership (MPO) requirement of 10 percent.

“Since trading in HLCM shares is presently suspended, the sale of the tendered (remaining 5.05 percent) shares will be subject to capital gains tax (CGT) and documentary stamp tax (DST) instead of the standard stock transaction tax (STT). This tax treatment is expressly provided for in Bureau of Internal Revenue Regulation 16-2012 that requires every sale…or other disposition of shares of stock of a publicly listed company that is non-compliant with the MPO to be subjected to CGT and DST. Aside from the applicable tax rate, the shareholders have to facilitate all the documentary requirements…needed to transfer shares outside of the exchange.

“HLCM now wishes to assign the responsibility of addressing this tax predicament to the exchange by informing shareholders that the matter can only be resolved if the suspension of its shares will be lifted by PSE. The lifting of the suspension is not a discretion or prerogative that can be exercised by PSE. It is a regulation covered and imposed under BIR RR 16-2012.

“These problems and concerns would not have arisen had HLCM took into consideration the interest of its public shareholders before implementing the share transaction (that reduced its MPO below 10 percent requirement).…”

Stalemate

Apparently, HLCM is not that concerned about the difficulties being faced by the remaining minority shareholders while PSE claims it had no choice but to implement the rules on delisting. In the middle of the stalemate are investors who just want to exit with the least possible problems.

Certain groups who are experts in the stock market are recommending options to resolve the intricate situation. It seems that any resolution should involve the joint effort of HLCM and PSE working closely together to address the concerns of the remaining small investors. The “finger pointing” has to stop.

The effort of the PSE to diversify the shareholder base by encouraging small investors to participate in the trading market is laudable. If organized and packaged in an innovative manner, there are funds that can be channeled to the equity market.

In order to have traction on this effort to attract small investors, PSE has to broaden its views and include ways on how to improve the protection and handling of the interest and concerns of the minority stockholders.

No bankruptcy

We extend our regrets to the management of Makati Shangri-La Hotel for an error in a previous column. Following is the email sent:

“We place great value on The Philippine STAR and we are deeply grateful for its support throughout the years. We recently came across your column dated Aug. 3, 2023 with the title “When time stood still for hotels” and would like to bring to your attention an error stating that Makati Shangri-La filed for bankruptcy.

“This statement is inaccurate. The effects of the unprecedented COVID-19 pandemic did cause the hotel to temporarily close. However, the property did not file for bankruptcy. We hope that this statement will be corrected the soonest possible time on Philippine STAR and on bizlinksphilippines.net as this has already been syndicated by msn.com.”

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.