The Securities and Exchange Commission (SEC) has upheld a 2017 decision by the Philippine Stock Exchange (PSE) to delist controversial agribusiness firm Calata Corp. and perpetually ban its leader, Joseph Calata, from joining other publicly listed companies.
The SEC’s recent en banc ruling, however, bucked the PSE’s order for the firm to submit an offer or buy back any and all shares tendered by shareholders. The SEC deemed this “untenable” considering that Calata did not have sufficient unrestricted retained earnings to buy back all the outstanding shares.
Calata was forced out of the PSE roster of listed companies on Dec. 11, 2017. Company chair, chief executive and president Joseph Calata was forever banned from leading or sitting on any board of a PSE-listed company. The rest of Calata’s board members were banned by the PSE for a period of five years.
The SEC also affirmed the disqualification of other Calata officers, namely, Jose Marie Fabella, Halmond Parker Ong, Melvin Calata, Johnny Uy, Edmund Solilapsi and Conrado Zablan from becoming directors and/or executive officers of any other issuer.
Calata was found to have committed 29 violations of the PSE disclosure rules when it failed to timely disclose changes in the shareholdings of its directors and principal officers. Companies are required to disclose to the PSE any “acquisition, disposal, or change” in their shareholdings within five trading days.
The PSE also found Joseph to have made multiple trades of Calata shares between November 29, 2016 and March 16, 2017, but the corporation only disclosed these transactions on June 23, 2017. Calata also made multiple trades of Calata shares from April 20, 2017 to June 20, 2017 but the corporation only disclosed this second set on July 7, 2017.
The SEC also noted Calata Corp. had committed 26 violations of the blackout rule, which prohibits trades when the company is in possession of material non-public information. The prohibition lasts for up to two full trading days after the price-sensitive information is disclosed.
The SEC added Joseph had consistently admitted that trades were executed while they were in possession of material non-public information and that there was a failure to disclose the same to the PSE.
“The other directors, although they neither illicitly traded nor failed to disclose, may also be held liable because they bound themselves to ensure that Calata would not commit any violation of the PSE disclosure rules. This duty is echoed in the listing agreement between Calata and PSE,” the en banc ruling said.
The PSE had reckoned the delisting had to happen because the penalties mandated by the Securities Regulation Code called for it and the controlling shareholder of Calata had rejected all proposals to buy back shares to allow the small investors to exit.
The PSE had offered a voluntary delisting for as long as the firm would conduct a tender offer to minority shareholders. A voluntary delisting, in contrast to involuntary delisting, gives the company the option to go back to the local bourse in the future.
At a book value of P3 per share, however, such a tender offer would have cost about P1 billion. Calata then rejected the proposal, saying this was not feasible and would bring the company to bankruptcy.