A day after Active Alliance, Inc. (AAI) voluntarily
suspended the trading of their shares on Nov. 22, five of AAI's major shareholders
agreed to sell 60,000,000 shares (75% of AAI's outstanding shares) to Prime Metroline Transit Corporation for Php
200,000,000 (roughly Php 3.33 a share).
Much to my surprise, well not really, Prime Metroline
Transit Corporation happens to be owned and controlled by Enrique K. Razon, Jr.
(also the owner of Bloomsbury Investment). In light of this, we can safely draw
an end to the week long speculation that Razon's new company Bloomsbury
Investments, which is constructing a $1 billion integrated casino resort
complex, will most likely use AAI as a vehicle to go public.
The question now is, will the Exchange or the SEC accuse
and charge anyone for insider trading? Just to make sure we understand what
insider trading is, Investopedia.com defines it as "the buying or selling
of a security by someone who has access to material, nonpublic information
about the security".
They go on to describe insider trading as an illegal
activity "when the material information is still nonpublic--trading while
having special knowledge is unfair to other investors who don't have access to
such knowledge. Illegal insider trading therefore includes tipping others when
you have any sort of nonpublic information. Directors are not the only ones who
have the potential to be convicted of insider trading. People such as brokers
and even family members can be guilty." (http://www.investopedia.com/terms/i/insidertrading.asp#ixzz1hR3d2Y1c)
If material information was only disclosed today, then how
come we've seen unusual trading patterns occurring more than a week earlier?
Why was AAI not aware of this possible material information especially since a
majority of their shareholders were already planning to sell their equity
ownership of the company? Or had they been aware, then why couldn’t they, on a
more practical sense, have voluntarily suspended the trading of their shares a
week earlier or once the rumors have somewhat started to affect their share
prices rather than waiting a day before they disclose such material
information? If the argument was based
on the fact that no deal was material yet, then why couldn’t they disclose that
a discussion or deal was going on once their share prices were sporadically
moving? Take Zeus Holdings, Inc. (ZHI) as an example. Earlier this year, ZHI
also had rumors of a possible backdoor listing by a mining company which consequently
had an impact on their share prices.
However, ZHI openly disclosed that it “has always been in continuing
discussions with owners of mining claims” (DCL #5305: Zeus Holdings reply to
unusual price movement) and does not deny the possibility that material news
may occur. Therefore, the investing public can fairly speculate at their own
risk without having to rely on pure hearsay.
Moving forward, what sort of action can we expect from the
regulating bodies of the Philippine security markets? In a private interview
with Market Surveillance Analyst with the PSE, the standard protocol for these
types of occurrences is to process an incident validation, a review of whether
or not a stock needs to be further investigated, after a series of unusual
price movements have stabilized. They then analyze the movement of stock prices
along with disclosures to verify the possibility of insider trading. With the Market Surveillance group being
private and all, I couldn’t fish any deeper than that. Frankly, I just want to
see something concrete happening with issues like these. I wouldn’t mind watching
a security related scandal erupting in the news since I find this crap
exciting.
With insider trading becoming a prevalent issue in the Philippines,
our regulators must work harder to identify and prevent such activity as to
allow a fairer market place. If they can’t, I’d at least like to see them try and
make a ruckus in the media. It would certainly draw a lot more attention to the
market and the industry in general.
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