Understanding Dante Tan's transactions - My Viewpoint

As I write this, the results of the Philippine Stock Exchange's inves-tigation into market transactions in shares of BW Resources Corporation are about to be released. However, outgoing (by March 25th, he says) Securities and Exchange Commission chairman Perfecto Yasay, Jr., has announced he will not make the PSE report public, not until the SEC has completed its own investigation. That, I suppose, is understandable, even if the long wait does fuel speculations on whether or not the BW stock was manipulated and, if so, by whom.

The problem is that most businessmen, even those who avoid the stock market like the plague, are sure they know the answers. And those -- who have been lucky enough to see a copy of the "preliminary findings" of the PSE and that number runs, conceivably, in the thousands, which is another problem -- know what directions the inquiry has taken.

For instance, the PSE, in a most gentlemanly manner, avers that it really didn't mean to focus on the transactions of Mr. Dante Tan. But what in heaven's name could it do? The man "figured prominently" (the PSE's words) in several accounts of at least seven stock brokerage firms. From February to October, 1999, his transactions ran in the hundreds of millions of pesos. From February to May of that year, his trades through certain brokerage firms were "exclusively buy transactions of BW shares." From June up to early October, 1999, he traded mostly as seller of the BW shares. During this latter period, too, he entered into those "private placements" and "buy-back arrangements" which have attracted so much attention, particularly on the part of pesky snoopers who, if the facts and circumstances warrant, want to nail Mr. Tan.

Hey, please don't get me wrong. I'm not pre-empting either the PSE or the SEC by in any way hinting that Mr. Tan is a stock market manipulator. Also, I know that in the world of business those -- who take risks, are innovative and defy convention -- are often richly rewarded The historical fact that some of these lovable renegades wind up in jail is unfortunate but, well, c'est la vie.

So, I guess, it depends on how Dante Tan is able to explain his actions. He might, for starters, expound on the brilliant strategy he adopted in accumulating the stock as it ratcheted up from a measly P2 to a glorious P107 in just about nine months. Both the PSE and the SEC, it appears, were, for most of that period, in the dark about why the stock was appreciating at such an unusually fast clip. Then, with exquisite timing, Tan turned around and sold the shares at allegedly obscene profits. But then, he apparently turned buyer again and, due to a commitment to sell an agreed block of shares to Mr. Stanley Ho, bought the stock at its peak. He then wound up stuck with inflated stock which he could only sell at bargain-basement prices. Those who insist that Mr. Tan's grief at this misfortune was unconvincing or short-lived really have a streak of satanic cruelty for which they will burn in hell.

And then, of course, there were transactions called "private placements" in the industry but condemned as "kiting" by certain unrelenting critics of Mr. Tan. Those critics heckle that Dante was selling privately at lower prices but executing those sales in the stock market at higher prices. Private sales at P17 per share, for example, were executed on the board at P24. The spreads ranged from a few pesos to as much as P40 per share. And since most transactions involved millions of shares, those spreads represented millions. Some say these sales indicated that the public was being misled, that the listed prices camouflaged the real, and lower, market prices. Others say this was a kiting scam. The seller would immediately be paid by a participating broker a part of the purchase price (the lower price indicated in the private transaction) up front. When the sale was executed at the higher price on the board, the balance would be settled directly between the buyer and the seller. Of course, if a buyer welched on the deal, the broker would be left holding the bag. The PSE and SEC will have to educate us on whether this procedure was legitimate, or a fraud upon investors.

The PSE and SEC investigations will help us to decide whether Mr. Dante Tan is victim or perpetrator, genius or con artist, hero or heel. Wonder if anyone's taking bets.