PLDT Inc. saw its worst trading session since tycoon Manuel Pangilinan and Indonesia’s Salim group bought the telecommunications giant in 1998, following the discovery of billions of pesos in overspending over four years that was disclosed to the public after trading hours last Friday.
PLDT shares were battered by furious selling throughout Monday’s session, plunging nearly 17 percent during the morning session before extending losses to 19.35 percent to P1,192 per share at the close and erasing about P62 billion in shareholders’ value.
Revelations of a P48-billion capital spending “budget overrun,” which PLDT chair Pangilinan told the Inquirer was initially estimated as much as P130 billion before an internal audit was launched a few months ago, spooked retail investors and large foreign funds, according to analysts.
It also raised questions over internal controls, auditing processes, and governance at the country’s biggest telecommunications company, which is among the “blue chip” stocks in the Philippine Stock Exchange index.
‘Investors fleeing risk’
“The sell-off reacts to investors fleeing from risks on its corporate governance, which is the main issue. If the allegations hold true, its reversion will be up to [PLDT] management’s initiatives to address the issue,” Gabryle Aguila, head of equity research at stock brokerage house Unicapital Securities Inc., told the Inquirer on Monday.
PLDT said on Friday it would implement a management reorganization “to address weaknesses that allowed such budget overruns to occur.”
Pangilinan also said a number of top executives have been suspended while the investigation was underway with the help of a third-party auditor not associated with PLDT’s external auditor, SGV & Co.
Aguila said the appointment of new executives and the release of the final audit results would “determine what the organization needs to do to regain the investing public’s confidence.”
PLDT was the most actively traded stock on Monday with volume reaching almost P1.5 billion, including net foreign selling of about P700 million.
The telco giant, which was a safe haven for investors during the pandemic alongside other telecommunications and internet stocks, was a drag on the broader PSE Index, which shed 1.27 percent to 6,414.27 on Monday.
Gokongwei-led JG Summit Holdings, one of PLDT’s biggest stockholders with an 11.23 percent stake, fell 3.16 percent to P47.45. State-run pension fund Social Security System also owns 4.45 percent of PLDT, the company’s latest regulatory filings showed.
PLDT said the budget overruns will reflect in its financial statements in 2022 and 2023, which will be offset by gains from the sale of cell tower assets to a third-party operator.
Still, investors and fund managers were waiting to see the full extent of the audit to better gauge the financial impact on PLDT, said Adrian Yu, head of institutional sales at stockbrokerage house COL Financial Group.
“There is still some uncertainty with how exactly they will treat this overspend, how much of it was actually lost, and how much is just mislabelling,” Yu told the Inquirer.
“Normally, when these things happen especially in the big-cap stocks, normally the fund managers just quickly flee to safety and sell first before asking more questions,” he added.
Yu advised investors to stay cautious when trading PLDT shares in the near-term.
“The sooner [PLDT’s management] can get to the bottom of this and reveal the extent of how much was really overspent, how much was mislabelled, then that’s the time we think the stock should bottom,” he said.
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