Setting an example
In a display of its self-regulatory powers, the Philippine Stock Exchange is imposing on a listed company the harshest penalty in its arsenal—delisting. The bourse made known last week its decision to start the involuntary removal of Calata Corp. from the roster of companies whose shares are publicly traded. In a notice to the investing public, the PSE announced that it was delisting Calata for 55 violations of the Revised Disclosure Rules of the Exchange from Oct. 6, 2016, to June 20. Specifically, the PSE said Calata had 29 violations of Section 13.1 of its disclosure rules from Nov. 29, 2016, through June 20. It also counted 26 other violations of section 13.2 of the same rules from Oct. 6, 2016, to March 16, and from April 26 to May 2. These mainly related to the nondisclosure of information that could influence the price of its shares.
Calata now joins Alphaland Corp. and Uniwide Holdings Inc., companies that have been delisted or are being delisted for violations of the PSE’s disclosure rules.
Calata has actually been under a trading suspension since June 30, after it was discovered that the agriculture products company did not immediately disclose trades made by its chair, CEO, president and owner, Joseph Calata. The company simply blamed the late disclosure to a staff member of the owner who allegedly misunderstood instructions to inform the PSE and instead filed the trading report in the company’s internal records. Presented with such a flimsy excuse, the PSE imposed a onemonth trading suspension after noting that Calata had violated the so-called blackout rule, which bans directors and principal officers who have learned of certain material information that could influence the price of their stocks from trading their shares within a prescribed period. In short, its officers may have engaged in insider trading activities.
However, the suspension was upgraded on July 24 to the start of the delisting process after the PSE, under its disclosure rules, noted that violations after the third offense already constituted grounds for delisting, which carries severe consequences. According to the PSE, a delisted company cannot relist within the next five years. Its directors and executive officers would also be disqualified from becoming directors or executive officers of any company applying for listing within the same period.
But in the spirit of fairness, the PSE is giving Calata “the opportunity to explain its side by submitting a Memorandum or Position Paper and by participating in a hearing specifically scheduled for this purpose.”
Calata is not new to controversy. It already had a bumpy relationship with regulators since it went public in 2012. Shortly after its listing, it was embroiled in a stock manipulation scandal that triggered an investigation by the Securities and Exchange Commission, which eventually charged at least 12 people with “anomalous” trading of shares and conspiring to “intentionally and unlawfully” raise share prices for their own profit. The investigation was triggered by P4 billion worth of transactions during a two-week period after the company’s listing that brought Calata share prices spiraling to unprecedented highs.
From a livestock supply chain business, Calata last year also planned to diversify into property and gaming through a $1.4-billion venture in Cebu with Sino-America Gaming Investment Group and Macau Resources Group Ltd. But the talks collapsed early this year.
The PSE move on Calata should serve as fair warning to other listed companies that at times intentionally delay the disclosure of material information that can affect the prices of their stocks. This has put the investing public at a disadvantage. The PSE is proving that a self-regulatory organization can actually put the public’s welfare above capitalistic interests. In the case of Calata, The PSE has shown that it is truly deserving of such SRO status.
THE PHILIPPINE STOCK EXCHANGE IS IMPOSING ON A LISTED COMPANY THE HARSHEST PENALTY IN ITS ARSENAL—DELISTING. CALATA CORP. NOW JOINS ALPHALAND CORP. AND UNIWIDE HOLDINGS, COMPANIES DELISTED OR BEING DELISTED FOR VIOLATIONS OF THE PSE’S DISCLOSURE RULES