MANILA, Philippines – Forcing foreign shareholders to divest a significant portion of PLDT common shares could wreak havoc on the company’s financial health as well as that of the local capital market, company chairperson Manuel V. Pangilinan said on the sidelines of the Philex Mining Corp. stockholders meeting.
Pangilinan also heads the mining company’s board of directors.
PLDT shares dropped by P75 Wednesday and the Philippine Stock Exchange index slipped 40.64 points or 0.95 percent to 4,249.35 following news that the Supreme Court ordered the Securities and Exchange Commission to determine the maximum allowable foreign ownership in PLDT, whose major shareholders include Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT Communications and NTT DoCoMo.
Pangilinan and PLDT spokesman Ramon Isberto, who was present on the sidelines of the Philex event, both said the telecommunications company had not received a copy of the Supreme Court decision.
However, Pangilinan told reporters, that the Supreme Court order, if implemented, would translate to the sale of 24 percent of PLDT’s common shares worth about P110 billion, Pangilinan said.
“There would be a tremendous selling pressure [of PLDT shares],” Pangilinan said. “It will tank.”
As of last count, Pangilinan said that 87 percent of the company’s shares were Filipino owned if common and preferred shares were counted together. However, PLDT’s common shares are 64-percent foreign owned.
“If you want to bring it down to 40 percent, who will sell? How do you tell investors to sell? And who can buy?” Pangilinan said.
Pangilinan also noted that part of PLDT’s appeal to shareholders has been the stock’s “liquidity,” aided by the common and preferred capital structure that has enabled foreign shareholders to easily buy and sell the common shares.
PLDT comprises about 30 percent of the stock market index, according to analysts.
“We don’t want to raise the alarm until we see the decision but if that’s true, definitely, that’s not good for business. Not only is it not good for PLDT but other companies as well with similar share structure. Also, it’s bad considering that the Philippines would be accused again of being erratic. It would dampen the investment appetite, not only for the market but also for long-term, foreign direct investments. This should be clarified,” Astro del Castillo, managing director of brokerage and investment advisory firm First Grade Holdings, said in a phone interview.
The prospect of foreign shareholders being forced to divest is “disappointing” for him “as a Filipino.” If such a ruling was implemented, he said, it would have a negative impact “here and abroad.” Pangilinan said it was also disappointing since the common and preferred share capital structure was something that the present management of PLDT simply inherited.
“PLDT has lived with this capital structure,” Pangilinan said, and pointed out that the set-up was believed to be “legal and valid” up until recently.
Pangilinan said that depending on how the reported ruling read, “It is a game changing rule” if it was really adverse to the Securities and Exchange’s position on the common and preferred shares.
“Why are they committing economic suicide?” Pangilinan mused. He said certain listed companies have been in the same situation as PLDT.
There would be adverse impact if such companies were discovered by the market, Pangilinan said. The market would be significantly affected in a negative way, Pangilinan said. “Is that what we want to happen?” he said.
Meanwhile, Philex Mining Corp. may be in for new record earnings for 2011 as its first-half performance seemed likely to beat that of the same period in 2010, Pangilinan said.
The country’s largest miner reported record revenue of P13.4 billion and net income of P3.9 billion in 2010.
Philex would announce its earnings guidance for 2011 when it releases its second-quarter report, Pangilinan said.