MJC Investments to convert P2.4B in advances to clear deficit

MJC Investments [MJC suspended] [link] revealed a plan by a group of shareholders to convert P2.43 billion in shareholder advances to Additional Paid-In Capital (APIC) in order to eliminate the negative balance of Stockholders’ Equity. The advances had been given to MJC with the understanding that they were to be “deposits for future subscription”. The conversion of the advances to APIC will not cause any new shares to be issued to the participating shareholders to prevent dilution. According to InsiderPH, MJC operates the Winford Hotel and Casino and is led by Alfonso Reyno.

 

MB bottom-line: It’s been 1.5 years since MJC last traded, with the last pre-suspension price coming in at P1.27/share. Any issuance of shares would probably have obliterated the public float, which is only at 13.45%, so the implication that the participating shareholders did this direct conversion to help the minority shareholders avoid dilution is a little funny to me. Nuking the public float with the cure to the deficit would have just caused MJC to be suspended for an entirely new reason (public float violation), so this was probably just the quickest and easiest way for the group to try and get this thing back into trading shape. MJC was suspended for failing to submit its FY22 Annual Report on May 18, 2023. According to Section 17.8(a)(2) of the PSE’s Consolidated Listing and Disclosure Rules (Disclosure Rules), the suspension for failure to submit an annual report should last a maximum of three months, with Section 17.8(a)(3) requiring the PSE to “initiate delisting procedures.” By the letter of the law, the PSE should have started to involuntarily delist MJC starting in August 2023. The PSE has not explained why it failed to follow the Disclosure Rules. 

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