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Increasing delistings a concern for shareholders

by Iris Gonzales (The Philippine Star) 

MANILA, Philippines — The growing number of companies delisting from the stock market is raising concerns among stock market investors.

The Shareholders Association of the Philippines (SharePHIL), a prominent group of minority shareholders in the country, is urging the Philippine Stock Exchange (PSE) to tighten rules governing the delisting of companies.

SharePHIL president Francis Lim told The STAR the PSE and the Securities and Exchange Commission (SEC) should help protect shareholders by amending rules on delisting.

“The PSE may want to consider amending its rules to require stockholders’ approval in addition to mere majority board approval. It may also want to consider requiring a supermajority vote both at the board and stockholders level,” Lim said.

He noted that in other countries,  67 percent or 75 percent stockholders’ approval is required.

“On top of that, some stock exchanges require that not more than a certain percentage (example 10 percent) of the shareholders present and voting should object to the delisting,” Lim said.

Lim who is also a veteran corporate lawyer, said the PSE should also address the tender offer price which is a contentious issue.

“The PSE may also want to consider a minimum tender offer price, which is at the core of the issue. There are a number of models in the region that the PSE can look at and it may choose what it thinks is best for our stock market,” Lim said.

A tender offer occurs when an investor proposed to buy shares from every shareholder of a publicly-traded company for a certain price at a certain time.

The buyer normally offers a higher price per share than the company’s stock price, which is determined by a third-party fairness opinion provider.

However, in the past, shareholders have complained about the low price offered by those doing the tender offer.

The latest company to delist from the exchange is

Travellers International Hotel Group Inc. (TIHGI), the joint venture of Andrew Tan and the Genting Group, which has commenced its tender offer last month.

In its tender offer report filed with the PSE, TIHGI said the P8.7 billion offer would end on Sept. 23, this year with the shares to be crossed on Sept. 30. The target delisting date is on Oct. 15,  this year.

TIHGI has set the tender offer price for its shares at P5.50 each, which is at the higher part of the P5.00 to P5.70 range in the fair value opinion given by PricewaterhouseCoopers and its local partner Isla Lipana & Co.

Melco Resorts and Entertainment Corp. (MRP), the company behind City of Dreams Manila, was also delisted from the exchange last June because it was unable to meet its minimum public ownership requirement.

Originally, MCO Philippines Investments, the major shareholder of MRP, wanted to go on voluntary delisting.

It has already completed the tender offer for shares of MRP last year.

The offer price given by MCO Investments was from P7.25 per share in the tender offer that ran from Oct. 31 to Nov. 29, 2018.

Companies decide to delist when they no longer see the benefits of being a listed firm and when they no longer want to go through the stringent disclosure process especially when it lessens their competitiveness.

The PSE for its part has committed to tighten rules on fairness evaluation to address complaints from shareholders who are unhappy with the valuation of their shares when there is a tender offer.

PSE officials said the exchange has proposed to select the fairness opinion evaluators to erase any doubts among shareholders.

Sources said this proposal is still waiting for the approval of the SEC.

This article first appeared in the September 16, 2019 issue of the Philippine Star