In an analysts’ briefing, FDC officials reiterated that the sale was not meant for the personal benefit of any shareholder but is a "legitimate exercise of a corporate right and in fulfillment of corporate duty to protect the financial integrity of both FLI and FDC, and to further enhance the value of their respective shares for all shareholders.
FDC president Josephine Gotianun-Yap had earlier told the SEC that the sale was intended to provide additional funds to enable FLI to meet maturing bond obligations on Feb. 8, 2002.
The SEC’s Compliance and Enforcement Department had tagged FDC as one of the parties in an alleged insider trading scheme in FLI early this year. The allegation stemmed from the sale by FDC of 44.9 million shares of FLI worth P107.1 million, which occurred from Jan. 17 to Feb. 6, 2002, at a price range of P2.28 to P2.50 per share.
Trading in FLI stocks heightened during the period when it was announced on Feb. 5 that the company would be issuing P1.2-billion worth of convertible bonds to Reco Grandhomes Pte. Ltd., owned by a subsidiary of the Government of Singapore, Real Estate Pte. Ltd., which would take up 23.4 percent of FLI’s outstanding capital stock upon conversion.
FLI said FDC’s sale accounted for only 14 percent of the total volume of shares traded during the period and even booked a P50-million loss when it sold the shares which carry a value of P3.485 each.
"The loss is secondary to our maintaining a strong credit track record. We are very proud of the fact that both FDC and FLI have successfully retired a total of $250 million in convertible bonds under a challenging economic scenario," Yap said.
FLI said FDC did not sell the shares because it expected the share prices to drop once the convertible bond issue was disclosed. "On the contrary, FDC believed that the prompt payment of FLI’s US dollar obligation, the reduction of its leverage, the entry of a strong strategic partner, (and) the elimination of its foreign exchange exposure would only have enhanced shareholder value. This was in fact borne out by the subsequent price increases of FLI."
It added once the market had reasonable time to absorb the information on the convertible bond issue, including the conversion price, FLI shares continued to rise to peak at P3.10 last May, or an increase of 44.8 percent.