In a two-page resolution signed last June 10 by Associate Justices Ruben Reyes, Renato Dacudao and Amelita Tolentino of the Eighth Division, the CA ordered the PSE to temporarily desist from enforcing the directives of the Securities and Exchange Commission (SEC) exempting the private placement of the shares of Itogon-Suyoc Mines Inc. (ISMI) to Ongpin’s PhilWeb group from the PSE’s rules on additional listing.
"The Court’s actions are a welcome relief. I have fought, purely on principle, the act of the SEC in giving way to the group of Roberto Ongpin to evade compliance with this rule and the complacent attitude of the current PSE acting directors in this regard," Coyiuto said.
In the same order, the CA gave the PSE and ISMI a 10-day period to comment on the resolution and to show cause why the application for preliminary injunction should not be granted.
The CA said it acted on Coyiuto’s April 25 petition to "obviate a situation where the issues raised in the petition might be rendered moot and academic."
Coyiuto, an incumbent board director and the former chairman of the PSE’s listing committee, had petitioned the CA to review and annul two previous SEC directives on the private placement issue as well as restrain the present PSE board and other Exchange officials from enforcing such directives.
Last year, the listing committee and the PSE board ordered ISMI to comply with the rules on additional listing, but officials of both ISMI and PhilWeb successfully appealed the case to the SEC.
In a March 25, 2002 order, the SEC affirmed an earlier decision that granted ISMI the waiver of the PSE rule which, in a nutshell, requires companies to first undertake a rights or public offering before the PSE approves the listing of additional shares subscribed through private placement, debt-to-equity conversion, share-for-share or property-for-share swap, or similar transactions.
Coyiuto, however, argued that the transaction should be covered by the listing rule emphasizing that such rule was crafted not only to protect the rights of all shareholders, particularly the minority, from unjust dilution by protecting their right to subscribe to further issues of a company especially if at a huge discount to market, but also, in a less obvious way, to prevent insider trading.
Last April 2, Coyiuto even urged the new PSE board led by chairman Vivian Yuchengco and president Ernest Leung to appeal the SEC order "in view of its far-reaching consequences on the independent standing of the PSE as a self-regulating organization (SRO), and to determine the extent of the SEC’s power to grant selective exemptions from the PSE’s listing rules."
The deal between ISMI and PhilWeb would transform the former from a mining firm into an information technology and multi-media company under the latter’s management. As payment for the services, ISMI agreed to let PhilWeb buy 40 percent of the company for P120 million. This would involve a private placement at a heavily discounted price of P0.01 per share for about 12 million unissued shares out of ISMI’s authorized capital stock.
ISMI had written the Exchange last year that due to its situation as a "moribound company," a rights offering would not be possible since no underwriter would be willing to assume the risks.
The SEC backed up this argument, noting that since ISMI badly needed the additional investments and capital infusion to resurrect its operations, the PSE’s insistence that it first undertake a right offer "would effectively prevent ISMI from pursuing the second course of action, and thereby preclude the corporation from any opportunity that can probably bail the corporation out of its present predicament."
But Coyiuto stressed the rule was crafted with the interest of all stockholders of all listed issuers in mind. "Thus, any amendment, modification or abrogation of the same should be made in the interest of stockholders of all listed issuers and not merely of one of few shareholders of a particular listed issuer."
He cited that the said rule was applied fairly in cases involving other listed companies such as PNOC-Exploration, Manila Broadcasting, SPI Technologies, Semirara Coal, First Metro Investment, Easycall Communications and Negros Navigation.
"To grant ISMI exemption from the requirements of the rule would have resulted in an inconsistent and unfair application of the rule," Coyiuto said.