Minority shareholders caught between a rock and a cement wall<\/strong><\/p>\n\n\n\n The Philippine Stock Exchange (PSE), in compliance with its own rules and rules imposed by the Bureau of Internal Revenue (BIR), has rejected the request of Holcim Philippines, Inc. (HLCM) to lift its trading suspension in order to facilitate the transfer of shares tendered to Holderfin B.V. The PSE insists that it can not lift the suspension for as long as HLCM\u2019s public ownership is below the 10% requirement.<\/p>\n\n\n\n Has this happened before?<\/strong><\/p>\n\n\n\n In 2020, Lotte Chilsung Beverage Co. Ltd. bought a 30.7% stake in Pepsi-Cola Products Philippines, Inc. (PIP), which brought down PIP\u2019s public float to 2.1%. Lotte Chilsung conducted a tender offer to the remaining minority shareholders and the PSE similarly refused to lift the suspension to facilitate the transfer of shares. PIP eventually held the transfer outside of the Exchange\u2019s facilities and delisted.<\/p>\n\n\n\n What does it mean for tendering shareholders?<\/strong><\/p>\n\n\n\n HLCM minority shareholders will now have to uplift their shares (i.e. convert them to certificated form), a process which will entail fees collected by brokers and clearing houses. <\/p>\n\n\n\n They will then have to submit their certificated shares to the tender offer agent, Stock Transfer Services Inc. (STSI). Shareholders will also have to file CGT Returns and Documentary Stamp Tax (\u201cDST\u201d) Return, and pay for the corresponding taxes: (1) 15% capital gains tax on the net returns, and (2) 0.75% documentary stamp tax on the par value.<\/p>\n\n\n\n Not a good look<\/strong><\/p>\n\n\n\n Tender offer plays have been all the rage these days, with stock market players snatching up shares of companies that have a public float slightly above the minimum requirement in hopes of making a quick buck if the company moves to delist. However, recent events may make these plays riskier unless the price premium is high enough to cover the additional costs of an off-exchange transaction. <\/p>\n\n\n\n Foreign shareholders may also perceive the PSE as either (a) a very effective implementer of the rules, and thus worthy of their trust, or (b) an inflexible regulator that does not yield to minority shareholders. Either way, foreign shareholders are definitely keeping a close eye given that both companies involved in recent tender offer mishaps, Lotte Chilsung and Holderfin B.V., are foreign companies.<\/p>\n\n\n\n