THE Philippine Stock Exchange Inc. (PSE), the operator of the equities market, has shelved plans to issue nonvoting preferred shares, but will, instead, siphon off more common shares still being held by the brokers to further reduce their shares to 20 percent to comply with regulations.
PSE President Ramon S. Monzon said they have decided against issuing 3.5 million preferred shares to those selling brokers, since the holders get to vote on certain corporate matters.
Common shares holders have voting rights.
The PSE needs to comply with provisions of the Securities Regulation Code, which placed an ownership cap of 20 percent of the voting stock for any industry, including stock brokers.
“So we have Nasdaq to configure our system [to track brokers’ ownership]; it took a while. So finally configured our trading system… that was my commitment to the PSE that we will not only comply but we will make sure that it will be a continuous compliance,” Monzon said.
The PSE then found out that there were about some shares still owned by the brokers that caused the breach in the 20-percent cap, of which 3.4 percent still owned by First Metro Investment Corp. (FMIC), which were mainly left over from the its stock rights offering last year which was also meant to dilute stock brokers’ shareholdings.
More than 2 percent comes from the affiliated parties of the brokers.
FMIC, the investment bank of the Metrobank group, was one of the underwriters of the issue and had to buy the PSE shares that were not subscribed by shareholders. The firm also owns a stock brokerage.
After the P445-million share buyback concluded last month, Monzon said the brokers’ stake in the PSE is now down to 23.8 percent.
They plan to talk to more brokers and persuade them to sell their PSE shares, he said; a second round of buyback is necessary to siphon off these shares being held by brokers. When the PSE made a stock rights offering, its offer price was P252 per share. The market price of PSE, however, is now down to P175 apiece, translating to a potential loss of almost P200 million for FMIC.
Monzon said they have yet to figure out how FMIC can divest these shares.
“We’re looking at ways to address it. We’re exploring other options to address that. We keep telling First Metro how can we work together so you can divest,” he said.
Aside from the FMIC shares, Monzon said they need to buy back only about 900,000 to 1 million PSE shares from brokers and they will already be compliant with the ownership cap.
“We are having what we call a directed buyback of shares. Basically, we’re telling the brokers, PSE is willing to buy the shares of brokers at a certain price,” Monzon said.
Monzon, however, said they are not buying these shares at a premium since this will be unfair to other shareholders who are not part of the buyback since they are not stock brokers.
“I have a deadline that by the end of the year we should be compliant so we can move forward with our plans,” Monzon said.