Social network alters market landscape
The news that Manuel V. Pangilinan had acquired a majority stake in GMA Network—a transaction that would mean a game-changing merger in the broadcast sector—first broke and went “viral” on social networking site Twitter.com.
From the initial spark caused by a “tweet” from Ruffa Guttierez, who many agree was the initial source of the news, the rumors of the P500-billion buy-in spread like wildfire on the Internet.
Both sides were quick to deny the news.
“All you need to do was look at the amount. It was ridiculous,” said Ari Chio of GMA 7.
At first glance, it would be easy for the casual observer to make the conclusion that buying GMA 7 would make sense for Pangilinan, who already controls the smaller TV 5 network. Merging the two would result in an entity with the brand equity and financial muscle that would be unrivalled in the industry—the kind of situation any group would envy.
But based on GMA 7’s stock price at the time, the company had a market capitalization of just P20.83 billion, which means the P500 billion Pangilinan’s media outfit MediaQuest Holdings was reportedly willing to pay would have been a premium of over 2,300 percent.
This prompted GMA 7 chairman Felipe Gozon to quip: “Wake me up when there’s an offer to buy me out at that price and I will sell.”
Given his 30-percent stake in the company, the buyout would land Gozon on the Forbes’ list of Philippine billionaires.
“But sometimes, people want to believe these kinds of rumors,” GMA 7’s Chio said, adding that investors are willing to use any information, even unverified gossip, to get ahead.
Jose Mari Lacson of Campos Lanuza & Co. Inc. said the spread of rumors over the Internet presents a fresh challenge to regulators.
“Rumors are part and parcel of investing. The Internet just makes it faster,” Lacson said. Because of the speed at which rumors can spread, Lacson said the market can be more susceptible to insider trading activities.
In countries like the United States, authorities would have checked if Gutierrez had accumulated shares before spreading her TV 5-GMA 7 merger story, and if she unloaded her stock at inflated prices after the rumor was spread.
Unfortunately, Lacson said, the Philippines had no specific agency with the mandate and enough powers to prosecute anyone caught trading using insider information.
For Astro del Castillo of First Grade Holdings, the Internet, which has replaced trading floor water coolers as the preferred venue for rumor mongering, can be a double-edged sword.
On one hand, he said, the speed that information can be spread on the Internet can mean more people making disastrous decisions based on unconfirmed and often misleading market talk. On the other, the Internet also allows investors to learn more about companies, enabling them to make better decisions in ways impossible in the past.
“The market will always be susceptible to rumors. As the old adage goes: ‘buy on rumors, sell on news,’” Del Castillo said.
