Listed technology company NOW Corp., once the darling of stock market speculators betting on the government’s third telco initiative, continued its losing streak on Thursday.
A lawsuit filed by the company’s affiliate, NOW Telecom, on October 8, 2018 questioning the government’s steep financial requirements a month before the bid deadline brought losses over the past two days to 42 percent, equivalent to about P4.8 billion in terms of market value.
On Thursday alone, NOW lost another 15.34 percent to P4.36 per share — a level unseen since January 2018, or when the government was starting to drum up interest for its third telco initiative. Excitement over the initiative and NOW’s plans sent its stock price soaring to a high of P20 last February.
In a stock exchange filing, NOW confirmed that its 19 percent-owned affiliate NOW Telecom sought a 20-day temporary restraining order before the Regional Trial Court of Manila.
“NOW Corporation does not expect any significant negative changes or effects caused by the filing of the said complaint by NOW Telecom Company Inc.,” it added.
Behind the scenes, investors and market participants complained that they were misled by social media posts and the timing of announcements made by company officials this week.
Specifically, they cited a Facebook post by NOW CEO Mel Velarde on 5:51 p.m. on October 8 containing a photograph of a receipt that NOW Telecom had paid the P1 million fee to acquire bid documents from the National Telecommunications Commission (NTC). The payment of the fee is a requirement before a company can participate in the bidding process this November.
The photograph contained a caption that suggested NOW’s interest in the selection process as well as the hashtag #getreadytorumble.
NOW Telecom that same day filed its lawsuit against the NTC before the Manila Court, citing illegal insertions and what it called onerous and extortionary provisions such as the performance and participation bonds that were covered in the final terms published weeks before.
NOW Telecom first announced that it filed a lawsuit in a statement released on the afternoon of October 9.
It also said in the statement that instead of the NTC’s selection process, which would use defined metrics such as proposed internet speed, investment and national population coverage, to choose a new major telco player, it wanted President Rodrigo Duterte to make the choice.
NOW officials did not immediately respond to a request for comment.
A NOW investor, a pharmacist based in Vanuatu, spoke to the Inquirer and said he started buying shares in the company in January, enticed by its plans and prospects to become the third mobile player. On Thursday, he said he sold all his holdings in the company at a loss.
“I have sold all my shares not because of the volatility, I understand it’s part of the stock market, and not because they filed a case but on how they released the information,” the investor said.
“I was blindsided. One day they said they bought the bid documents then out of nowhere the next day, we heard [about the lawsuit]. They posted the receipt [the day before] without saying a word,” he said.
A broker, who declined to be named, said that investors were “angry” with the way the company disseminated information over the past few days.
But he also explained that there were gray areas when making disclosures of this nature. He said companies were typically required to make disclosures in case it was on the receiving end of a lawsuit and not the other way around.
Eliseo Rio Jr., acting secretary of the Department of Information and Communications Technology (DICT), slammed the company for seeking to derail the bid process and suggested that it lacked the financial resources to compete.
Velarde said NOW Telecom posted a net income of P99 million in 2017.
Based on the DICT’s bid terms, a third telco is expected to spend anywhere from P140 billion to P240 billion to roll out a nationwide telco network in five years. To do so, local companies are expected to team up with foreign telcos for both their technological expertise and financial resources. It was not immediately clear if NOW Telecom currently has a foreign partner.
At least five other companies bought bid documents from the NTC. Rio said none of the five complained about the financial requirements set by the government. /kga