Financials In The Halili - Kho Sex Video

My first reaction to the Katrina Halili – Hayden Kho sex video was: There goes the P500 million IPO of the Belo Clinic. You see, before the U.S. financial meltdown that is bringing the whole world into a recession, there were plans to have an Initial Public Offering (IPO) of Belo Clinic shares in the range of P500 million up to P1 billion. One half of the offering was to be of primary issues or new shares and the other half the shares of existing shareholders. This would have cashed in for the existing shareholders P250 million to P500 million, and this would include Vicky Belo and Hayden Kho. With the ongoing scandal, it now seems unlikely that the IPO will attract investors, so the investment bankers/underwriters may not proceed with the IPO at this time. The Belo Clinic is now suffering a “reputation risk” which makes the IPO unattractive to investors as it will affect the revenue stream, the cash flows and the profitability of the company.

In the last decade or so, “reputation risk” has been recognized in business. All major companies worldwide, especially the listed and consumer oriented companies, have put a value on their reputation. There is in fact a dollar or peso value on the brands of such companies as CocaCola, Xerox, IBM, Toyota, Microsoft, Hyundai and others, and it runs to hundreds of million of dollars. This is because of the recognition and goodwill that these brands have acquired over the years. On the other hand, CITIBANK, BA, Lehman Bros., Sony, AIG, and others, have seen their brands devalued as their reputation tanked. In the Philippines, the SM, Ayala, San Miguel, Aboitiz, PLDT, and the like, have achieved values for their corporate and brand names. Some of them have even designated “Reputation Risk Officers” who are primarily responsible for their corporate reputation. The Belo Clinic was on the way to establishing a brand reputation and the IPO would have been the way to put a value to their name. As of this writing, the Belo brand is in bad shape and of doubtful value. Their revenue stream and financial condition might be adversely affected, depending on the reactions of their clients to the scandal.

The other financial dimension in this sex video scandal is the amount of economic activity that this scandal has generated and will continue to generate. The media coverage has certainly increased the sales and patronage of newspapers, radio and TV viewers, internet/cellphone activity, and the sales of pirated DVDs. This is a positive financial impact, as any increase in economic activity, especially in a slowing economy, is good. There is also a positive impact on the cosmetic surgery industry, as this scandal highlights the competence of the practitioners in the industry, and this could translate to more patronage from local, foreign, and balikbayan patients. Estimates have put this industry’s annual revenue in the P25 billion mark and growing at 20 percent per annum. So together with the rest of the Medical and Wellness Tourism industry, we are looking at an over-a-hundred-billion-peso industry. Another financial activity that will be increasing is the amount of lawyers fees that will be paid by all those involved in the scandal, and this will not be a small amount, judging from the name lawyers that have been engaged. Then there is the impact of the talent fees for movies, TV appearances, and endorsement fees of all the celebrities touched by the scandal. All in all, this sex video scandal will add a few hundred million to the financial transactions in the country.

The moral dimension of this scandal, I will leave to the more competent others. Let me just say, that there is a “cost and benefit” consequence in all human endeavor, financial, social and others. Somehow, there is a sense of justice.