BANCO de Oro Unibank (BDO) is acting a new role—that of a corporate messiah of Atlas Consolidated and Mining Development Corp. It is acting this role by not collecting what is due it but by agreeing to the conversion of its P5.342-billion loan to the mining company, now controlled by businessman Alfredo Ramos, who belongs to the family that is more known as the owners of the National Book Store. The loan-to-equity conversion will be among the items in the meeting agenda to be submitted for stockholders’ ratification on November 9. The Sys will send the representatives and nominees of SM Investment Corp., which already owns 316.242 million shares, or 17 percent, which entitled the family to three seats in the board. 

Businessman Henry Sy Sr., whose family controls Banco de Oro, has invested in Atlas and is seen to continue investing not only in the mining firm (despite the company’s past losses) but also in Carmen Copper Corp., an Atlas subsidiary. Atlas reported deficit of P13.355 billion as of December 31, 2010, and P12.596 billion as of December 31, 2009. By June 30 Atlas trimmed this deficit to P12.28 billion, the amount which it aimed to wipe out or reduce by reducing the par value of its capital stock by “an amount not exceeding P2.” This may not be enough to erase Atlas’s accumulated losses. Still, the company plans to undergo equity restructuring, which will involve the increase in its authorized capital to P30 billion, or 3 billion common shares at P10 par value, from P20 billion, to totally eliminate this deficit which it has been carrying in its books for years.

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As of September 23, more than 1.764 billion of Atlas’s 2 billion authorized capital stock has been paid-up. With the proposed capital increase, the mining company will have a total of 1.236 billion shares available for issuance, which would be more than enough to accommodate the shares to be issued to BDO and to the Ramos group.

In the absence of details on the reduction of Atlas par value by not more than P2, it would be safe to assume that the company will also apply its additional paid-in capital of P975.485 million in reducing its deficit. Incidentally, additional paid-in capital can be used only in reducing or wiping out deficit. Previously, it was declarable also as stock dividend until SEC Chairman Fe Barin questioned this particular policy which, she had said, would, in effect, negate the wisdom of putting premium on a company’s issuance of additional shares. To this many, if not all, would agree that such premiums should not be returned to stockholders.

Was the partnership between the Ramoses and the Sys the main reason for Atlas’s continued surge? Many months ago, the stock’s rising price has been surprising to investors as Atlas has been operating on a deficit. The answers have finally arrived: BDO’s entry into mining by joining the Ramos group in boosting Atlas’s mining activities, particularly Carmen Copper, which is a 100-percent-owned unit. As a result of this partnership, Atlas’s even hit a 30-day high of P20.10 on September 11. Yesterday, Atlas closed at session’s low of P17.50 after opening at P17.80 and peaking at P18. Atlas dropped to month’s low of P14.50 on October 4.  There could be a basis for this remarkable performance such as Atlas’s financial recovery. In a filing, Atlas reported net profit of P2.028 billion in the first six months of 2011, close to three times its net profit of P687.305 million in the same period in 2010.

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Incidentally, if one were to believe—or adopt—the conclusion made by certain sectors, particularly the present management of the Development Bank of the Philippines, that the acquisition by a buyer of a big block of shares in a listed company and then selling at a profit is a crime called insider trading, then what would they make of listed companies buying back their own shares which they then reissue them at a premium? If the Securities and Exchange Commission (SEC) were to look into all these buyback activities, then-Chairman Teresita Herbosa would be very busy looking into every trade in the market and every transaction of insiders. And if all these transactions by listed companies were to be the basis in looking into insider trading activities, then the SEC might as well totally ban share buyback. If not, then it should come out with a policy disallowing the reissuance or sale of treasury shares. And if these were insider trading, who should be charged for such? Would it be the board or the president who implements the decisions of the board?

Again, it the conclusion of certain senators were to be believed, then here is a case which, by their standards, of insider trading. A listed company reported having made a profit of more than half-billion pesos from the sale of sale of treasury shares. Should the investors who sold their shares to the company sue to recover their “lost profits?”