What is a PDR?

What is a PDR — this strange acronym for what has kicked at the shin, the 1987 Constitution Section 11, Article XVI that insists, “The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly owned and managed by such citizens.”

There are at least three highprofile media corporations namely ABS-CBN, GMA, and Rappler that have used Philippine Depository Receipts (PDRs) to obtain foreign investment, even at the expense of recognizing the constitutional prohibition of foreign ownership in the industry of mass media (Lorenzo E. Delgado, editor-inchief, The Bedan Review, January 2018: “Philippine Depositary Receipts: Mass Media’s Existing or Emerging Loophole To Constitutionally Mandated Full Filipino Ownership?”) PDRs are financial instruments that foreign funds can buy into, allowing media and other Filipino firms that must keep foreign ownership at 40%, to raise funds globally (Ibid.).”

PDRs are not new, perhaps copied from one of the most common types of Deposit Receipts (DRs) — the American Depository Receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s. These are negotiable (transferable) certificates, traded on the local (US Stock Exchanges) but with underlying other security, usually in the form of equity, that is issued by a foreign publicly listed company ( Investopedia: Jan. 10). There are also global depositary receipts (GDRs) — the European DRs and international DRs, denominated in dollars or in euros, traded on the stock exchange of the investor’s country as certificates/ receipts rather than the actual equity share, which is deposited in a foreign bank (Ibid.).

The ADR (or the PDR) likens to a financial derivative evolved from an original equity investment, and may be traded as a derivative at its level, while it is also an option bought by the investor to be exercised when and if the investor wants to convert to the underlying equity itself.

The Philippine Stock Exchange affirms that “a Philippine Depositary Receipt ( PDR) is a security which grants the holder the right to the delivery of sale of the underlying share (as cited in the Bedan Review, op. cit.). A PDR consists of a deposit price and an option price, which is considered as payment when the buyer opts to convert said PDRs to a corporation’s share. PDRs are not evidences or statements nor certificates of ownership of a corporation. However, each PDR represents a share, even in a restricted company, and when bought by a foreign entity, gives the buyer the right to all the dividends due the shares of stock acquired (Ibid.).

SyCipLaw advised Mercury Media Holdings Ltd. in the special block purchase of P2.3 million PDRs issued by ABS-CBN Holdings