No lifting of Pepsi PH trading suspension before delisting

The Philippine Stock Exchange will not lift the trading suspension on local beverage maker Pepsi Cola Products Philippines Inc. (PCPPI) before its delisting, constraining the exit of the remaining small shareholders who had tendered their shares to Korean firm Lotte Chilsung.

This is due to existing Bureau of Internal Revenue (BIR) regulations that constrain the PSE from allowing trades on companies whose public ownership had fallen below the 10 percent minimum requirement. As such, sellers of PCPPI shares will have to pay capital gains tax in order to exit.

PCPPI is undergoing a voluntary delisting from the local bourse as its public ownership had declined to 2.1 percent following a tender offer conducted by Lotte Chilsung to consolidate its shares.

Trading on PCPPI’s shares had been suspended at the PSE since June 18 this year after Lotte’s purchase of about 1.13 billion common shares resulted in PCPPI’s public float falling below the 10 percent requirement for continuing listing. Lotte conducted a second round of tender offer in September, to comply with voluntary delisting rules.

In its Sept. 15 tender offer report, Lotte stated it would purchase all the tendered and accepted tender offers shares “via a block sale through the facilities of, and subject to approval by, the PSE, on or about October 26, 2020.”

The tender offer report explicitly stated that the cross of tendered shares via block sale was subject to the approval by the PSE. In a memorandum posted on Thursday, however, the PSE pointed out that the tender offer report had not made any reference to the applicability of the provisions of BIR’s revenue regulations No. 16-2012 regarding the tax treatment of sales, barters, exchanges or other dispositions of shares of stock of publicly-listed companies whose public ownership levels fall below the minimum public ownership requirement.

The request for confirmation on whether the tendered shares may be crossed through the exchange’s facilities was raised on September 22, 2020, while the tender offer already commenced on September 16, 2020, the PSE said.

“It is on the basis of the BIR’s RR 16-2012 that the Exchange was constrained to deny Lotte Chilsung’s request to lift the trading suspension and allow the crossing of the tendered shares as the same would be violative of RR 16-2012,” the PSE said in a notice to the public.

“The Exchange wishes to remind all listed companies that it is imperative for them to ensure that all corporate actions are done in compliance with applicable laws, rules, and regulations and that all material information be properly disclosed and disseminated to the investing public. A similar obligation is likewise imposed upon any other person or entity who may have transactions involving listed companies.”