ABS-CBN Corporation (ABS), Rockwell Land Corporation (ROCK), and First Gen Corporation (FGEN), are operating public companies that are thought to be owned by the Lopezes. But the Lopezes do not actually owns them. The Lopezes only control them. They wield control over these companies through layers of holding companies.
At a market capitalization of around 86.2 Billion Pesos, FGEN would be the group’s most valuable company. Many would think that the Lopezes own FGEN but in reality the Lopez’s effective interest in FGEN is only at around 18.66%. How did the Lopezes able to control FGEN with even such a small effective interest?
FGEN is controlled by First Philippine Holdings Corporation (FPH) which holds a 67.74% stake in FGEN as of June 30, 2020. In turn, FPH is controlled by Lopez Holdings Corporation (LPZ) which owns a controlling stake of 50.63% as of June 30, 2020. Lopez Holdings Corporation (LPZ) is the principal holding company of the Lopezes which they own a stake of 54.4% as of June 30, 2020.
Through their 54.4% interest in Lopez Holdings Corporation (LPZ), the Lopezes are able to control ABS, ROCK, and FGEN. The Lopezes wealth is reckoned therefore to the value of their 54.4% stake in LPZ. The Lopezes has not shown a solid track record in growing shareholder value. LPZ has a recent market capitalization of only 10.4 Billion Pesos and 54.4% of that would only be 5.7 Billion Pesos. In the world of the super rich 5.7 Billion Pesos is peanuts. Henry “Big Boy” Sy Jr. can raise that amount in a day. A 54.4% stake is no super majority. It is a slim majority. Who ever controls LPZ, controls ABS, ROCK, and FGEN.
Failure to grow share value proves fatal and the Lopezes don’t have to look far to learn that lesson. The Lopezes lost control of MERALCO (MER) precisely because of that. MER share price under the undisputed control of the Lopezes peaked at around only 95 a share and went as low as around 6.5 a share. Because the Lopezes failed to grow the share value of MER, it attracted “corporate raiders”. With low share value, MER became affordable to anyone. Had the Lopezes grew MER share price to 300 a share, nobody would have been able to afford it and they would not have lost it. Over the years, they have lost Maynilad, NLEX, Bayantel, and Extelcom. Debt problems may have been the culprit but had they been able to raise capital through equity they would have had the funds to pay the debts. But capital raising through equity was not an option to them because of their low share value. Doing so with a low share value would be very dilutive and the effect would be the same, losing control.
Growing shareholder value is very important. The resignation of Gabby Lopez at ABS, FGEN, ROCK, and FPH is maybe the start of the reorganization of the Lopez group to boosts shareholder value.
Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point. Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.