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Did RVO do the swing?

(Article published in the Sept 7,2011 issue of Manila Standard Today) 

The Honourable Roberto V. Ongpin ought to be given credit for, among his many other qualities, being very open and transparent, at least in his defense of his now controversial acquisition and sale of Philex shares.  He was so upfront with the whats, whys and wherefores, of his profitable transaction that he even went to the extent, needlessly to my mind, of putting his gains in legal jeopardy for being what are called by stock market players as  “short-swing profits.”

In his letter to Ms. Lala Rimando, dated 01 June 2011, the Honourable Ongpin admitted:

“I was happy to buy the shares from DBP because I continued to accumulate shares, as I said with funding from other banks, fully secured like DBP...I accumulated Philex shares on the basis of fundamentals i.e. that the price of copper and gold would continue to strengthen as they in fact have up to today’s date and, the fact that the group of Manny Pangilinan had acquired a major stake in Philex...I felt that at some point Manny would want to increase his stake and have full control as opposed to just being on par with SSS,...I was convinced that, sooner or later, MVP would offer to buy my stake, and obviously, he would have to pay a premium, since it would enable him to take control.”

“As things turned out,” the Honourable Ongpin continued, “it happened that it was sooner rather than later because Ramon Ang and GSIS had expressed interest in taking stakes in Philex.  And so it was not a surprise to me when Manny Pangilinan approached my partner Eric Recto and offered to buy our Philex stake.  After two days of negotiations, we settled at a price of Php21 a share.”


The sale to MVP of the Honourable Ongpin’s share in Philex appears to have occurred on or about the first seven days of December 2009; on 02 December a share purchase agreement was executed,  five days later the deal was signed, sealed and delivered.  Among those Philex shares so sold were 3,217,562 shares in the name of the Honourable Ongpin himself; other sellers were Goldenmedia Corporation for 123,221,372 shares; Boerstar Corporation for 175,085,852; Elkhound Resources, Inc. for 66,250,000 and a certain Walter W. Brown for 24,974,374.

Goldenmedia Corporation (“Goldenmedia”) is a financial holding company whose major stockholder was Boerstar Corporation which, in turn, was majority-owned by G.A.M.E. Equities, Inc. whose General Information Sheet filed with the Securities and Exchange Commission in 2005 had the Honourable Ongpin as Chairman of the Board and stockholder.  It is an affiliate of Delta Ventures Resources, Inc. (“DVRI”) which in 2009 had applied for and had been granted an initial credit line of P150,000,000.00 by DBP’s Baguio City Branch to “partially finance working capital for acquisition of listed shares of stock”, notably Philex.  DVRI was on 04 November granted by DBP another loan in the amount of P510,000,000.00 which, according to DBP’s Offering Ticket No. RMC-MM-09-156 dated 04 November 2009, was “to finance acquisition of shares of stocks of Philex Mining Corporation owned by the Bank.”

Goldenmedia’s audited financial statements as of 31  December 2008 showed a net loss of P13,703,848.01.  Still, for reasons yet unknown, it was the chosen vehicle to be the registered owner of the Philex shares that were to be purchased with the proceeds of the P510 million loan that was taken out by DVRI.  DVRI bought on 05 November 2009 the P50 million shares of Philex that were owned by DBP for a total purchase price of P637.5 million at P12.75 per share. Dutifully, Goldenmedia pledged the Philex shares so purchased back to DBP as collateral for DVRI’s P510 million loan. 

In short, among those Philex shares that the Honourable Ongpin had been accumulating in a big way, personally and through controlled companies, way back, according to his letter to Lala Rimando, as the “early 2007” were the 50 million shares that he had bought, through DVRI/Goldenmedia, from DBP as late as 05 November 2009.  Those same 50 million shares, were also among those sold to the company of MVP, the Two Rivers, barely a month later, on 07 December 2009.

So, what?

Enter the party-pooper, Republic Act No. 8799, the Securities Regulation Code.  Subsection 23.2 of that law provides that “For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity of such issuer within a period of less than six (6) months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention of holding the security purchased or of not repurchasing the security sold for a period exceeding six (6) months.” 

In plain English, it could be that at least part of the Honourable Ongpin’s profits from his sale of Philex shares to MVP (clearly at least those shares bought in 05 November 2009 and sold in the first week of the following December) may not have been his after all, but Philex’s.  MVP in representation of the issuer just might be obligated to claw them back for the company.

It could be, as the Honourable Ongpin wrote to Lala, that Manny Pangilinan was happy to pay the “premium of about Php4 or 5 per share” that he had to pay for control of Philex and that “looking back, with Philex hitting a high of Php 21.75 a few days ago [as of 01 June], the smartest one of all was Manny Pangilinan because not only did he achieve control of Philex, he has actually doubled the value of his investment.” 

          But MVP is not just the leader of the controlling group of Philex but, more important, also the worthy steward too of the minority stockholders who now look up to him to lead the company to its golden future.  For their sake, for those who only stood and watched by the wayside as the Honourable Ongpin made his moves nearly two years ago, MVP, I submit, ought to seriously consider the moral, if not legal, burden imposed on him by Subsection 23.2 of the Securities Regulation Code.