Biz Buzz: Rogue stockbroker strikes

P2.2 billion.

That’s the value of a high net worth client’s investments in the stock market that’s gone missing from the inventory of a local stockbroker named DW Capital Inc., according to our sources at the bourse.

The stink is such that the Capital Markets Integrity Corp.—the independent watchdog of the Philippine Stock Exchange—recently ordered the suspension of DW Capital from trading directly or indirectly on the PSE. Yes, it’s that bad.

Biz Buzz was informed of the details by a couple of market officials familiar with the problem and, if the reports are accurate, this seems to echo previous stockbroker scandals of years gone by. Simply put, a ranking official of DW is being accused by his client of trading the latter’s stocks (selling them, to be exact) without proper authority… and running off with the money.

According to at least two sources, the problem started not too long ago when one of DW’s clients called up the firm’s boss to order that his portfolio of shares in Metropolitan Bank and Trust Co. be sold. We’re guessing this is on account of the recent insider fraud incident at Metrobank the Inquirer revealed a few weeks ago that resulted in a sharp drop in the bank’s shares (but that’s another story worth telling one of these days).

In any case, this high net worth client—the owner of a large chain of shopping malls in Visayas and Mindanao—was shocked to learn that his holdings of Metrobank stocks (worth P2.2 billon at acquisition) were nowhere to be found.

Word on the street is that the client’s portfolio was liquidated by the ranking DW official without his knowledge and the proceeds were kept by the official in question. That’s not the worst of it. We’re told that this stockbroker is actually married to the daughter of the billionaire client who is now worth a couple of billion pesos less (not that it would impact the latter’s net worth too much though).

As is to be expected, this DW official is now the subject of an intensive search by concerned authorities, but has yet to surface, we’re told. Well, you’d hide, too, if there’s P2.2 billion in a client’s funds that you somehow made to disappear, right?

Biz Buzz heard the CMIC had approached the Securities and Exchange Commission seeking an order to take over DW Capital and, presumably, liquidate its assets to settle its liabilities with its clients, many of whom are prominent personalities in the Chinese-Filipino community. Now, we could only hope that there are still enough assets left. — Daxim L. Lucas

Trillion-peso club

The SM group founded by tycoon Henry Sy has become the indisputable bellwether of the local stock market with two of its listed firms now commanding a market valuation of P1 trillion each.

SM Prime Holdings, among the most valuable property firms in the region, was first to reach this milestone last June. But two days ago, flagship conglomerate SM investments Corp. (SMIC) also joined the club. If we’re talking about the largest among the large-cap stocks in the country, these two are the front-runners.

The next most valuable conglomerate has about half of its market valuation, at best.

Enjoying a dominant market share in property, banking and retailing businesses in the country, SMIC is deemed as a good proxy to the Philippine economy, which is the fastest growing in Southeast Asia.

If we add banking arm BDO Unibank’s P562-billion market cap, that means the SM controls companies valued at P2.56 trillion by the stock market. This accounts for 26 percent of the local stock market’s entire market cap of P9.69 trillion.

Then there’s leisure estate and gaming firm Belle Corp., valued by the market at P37.48 billion. The SM group likewise has interest in Atlas Consolidated Mining, which is worth about P10.4 billion. —Doris Dumlao-Abadilla

Coworking space

With flexible office leasing scheme becoming the in-thing among millennial entrepreneurs and freelancers who need to operate under an asset-light business model, FlySpaces, a start-up provider of such innovative office solution across the region, recently raised $2.1 million in fresh capital, mostly from Filipino investors.

The new Filipino investors in FlySpaces is led by Raymond Rufino, co-president of office property developer Net Group, who is joined by a millennial-led private equity firm and other top property developers from the Philippines. This deal marked the largest ever “pre-series A” round (before a start-up company goes to the first significant round of venture capital financing) led by Philippine-based investors.

“Filipino developers have shown their appetite for innovation, and I could not be happier to welcome some of the most well respected names in local commercial real estate among our investors, as we are proudly a Philippines’ success story”, FlySpaces CEO Mario Berta said.

“In the last two years flexible office space and coworking have been the hottest topic in commercial real estate, with the region’s biggest brands like CapitaLand and Ascendas moving in this direction. With all of the recent joint ventures and investment deals happening, commercial real estate is finally looking ready for disruption,” Mario said.

In the Philippines, property giant Ayala Land Inc. has also ventured into this space under the brand “Clock In.”

Founded in 2015, FlySpaces now has over 1,000 offices and 400,000 square meters of flexible office space under management. It has served more than 500 customers over the last 18 months across the five markets in where it operates: Philippines, Singapore, Malaysia, Hong Kong, and Indonesia. “We really focus on SMEs (small and medium enterprises) and MNCs (multinational corporations) that are very quickly seeking out flexible office space solutions for multiple reasons, from cost reduction to employee mobility,” said Guillaume Martin, chief operating officer and co-founder of FlySpaces. —Doris Dumlao-Abadilla

Same old problem

Time can change a lot of things, and sometimes, very little as well.

For example, we still don’t have a national broadband project, a decade since it was scuttled due to corruption issues during the Arroyo administration.

For Romulo Neri, who was head of the National Economic and Development Authority during that tumultuous period, it was unfortunate politics that got in the way of an otherwise valuable project.

“They should have done it a long time ago,” Neri told BizBuzz.

The P16-billion national broadband project, at the time described as “overpriced”, would have paved the way for better quality internet in far-flung areas.

In other words, it was not too different from the now-revived national broadband project under the Department of Information and Communications Technology, led by Rodolfo Salalima.

Understanding the concerns surrounding the deal with China’s ZTE, Neri recalled that he urged lawmakers to nevertheless pursue the project and choose a different supplier, citing its immediate need.

“They didn’t believe it,” he said.

Of course, a whole decade had passed and the Philippines sank lower and lower by most global fixed broadband measures, all while demand exploded. That’s not even going into the obvious economic benefits that can be derived from a high-speed internet connection.

Recently, certain lawmakers were raising issues on the unused portion of the budget of the DICT, and a cut was suggested. Recall the DICT is a relatively new organization, whose big-ticket projects—including a new national broadband project—have yet to be rolled out.

On the question of funding for these crucial projects, haven’t we learned our lesson yet? —Miguel R. Camus