The Philippine Stock Exchange [PSE 204.00 0.89%] imposed “sanctions” on Dennis Uy’s DITO CME [DITO 5.07 0.59%] [link] for violating “the Securities Regulation Code, its Implementing Rules and Regulations, and the Consolidated Listing and Disclosure Rules of the Exchange” when it canceled its stock rights offering (SRO) in January.
Barkadans will remember that DITO killed the SRO during an active offer period during which it took money from investors for SRO shares. It’s not clear how many individual investors were impacted by DITO’s decision, since neither DITO nor China Bank Capital, its SRO underwriter, ever released statistics on the take-up of the offering.
While the market seemed confused and slightly amused by the bizarre behavior from DITO, the PSE certainly wasn’t laughing, and made it clear that DITO and China Bank Capital would be held to account and that steps would be taken to prevent companies from dropping an on-going SRO (referred to now as “Pulling a DITO”) in the future.
As we’ve seen in recent equity raise events, the PSE has followed-through on these threats by forcing companies and underwriters to tighten the legal language of offerings to make it much more difficult for those offering companies and underwriters to dodge commitments by Pulling a DITO, and now by imposing “sanctions” on DITO and on China Bank Capital for their roles in the fiasco.
MB BOTTOM-LINE
While I’m glad the PSE has finally taken action against DITO for what it did, I’m frustrated that the PSE was not more transparent about the sanctions themselves.
Don’t get me wrong, I’m not implying that there’s some kind of cover-up here, since the PSE has not (to my knowledge) published the details of the sanctions that it has imposed in the past. I just wish that such a brazen violation of the market’s norms, and its investors’ confidence in those norms, came with a penalty that was clear, public, and known, so that all participants (from individual investors to the leaders of other listed companies) could see the lengths that the PSE would go to in order to protect the market’s integrity, and better understand the potential costs of Pulling a DITO in the future.
Maybe the PSE is hesitant to elaborate because the sanctions that apply aren’t especially impressive relative to the sheer audacity of DITO’s move, and in that case, I understand. I’m happy to see the new legal language baked into all of the post-DITO transactions, and I’m hopeful that the PSE might start to be open and transparent about the penalties and sanctions that it enacts on companies. The market is not harmed by having more information.
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