Government News Analysis

Don’t bet on a PhilWeb recovery

The share price of the Philippine’s largest public Internet company, PhilWeb, founded by business tycoon, Roberto Ongpin, has just fallen off a cliff. In just 40 days it has plunged 82.58%: from PHP24.40 on 30 June to PHP4.25 on 9 August. And although Ongpin has stepped down as the company’s chairman – in an effort to stabilise the situation (though that wasn’t the reason he gave) – the chances of a share-price recovery look extremely bleak as the survival of the company hangs in the balance.

PhilWeb, which has a chain of 286 e-Games outlets, has been hit by a perfect storm: From one side it has been slammed by the decision of government-owned Philippine Amusement and Gaming Corporation (Pagcor) to end licences for online gaming. The inability to collect taxes on gaming transacted outside the country is the reason for the new policy. PhilWeb’s permit has now expired and it has been told by Pagcor that it will not be getting another.

But the biggest pounding the company took was earlier in the month when President Rodrigo Duterte, while meeting election volunteers at Malacañang, the presidential palace, singled out Ongpin as an oligarch and precisely the type of business operator which he intends to vanquish in his effort to drive out corporate corruption. “The plan is to destroy the oligarchs that are embedded in government. I’ll give you an example, publicly – Ongpin, Roberto,” he said.

And that was when PhilWeb’s share price took a nose dive, And it was no coincidence that the share value of a second Philippine-listed firm where Ongpin is chairman – Atok Bing Wedge Co. Inc (ABW), an investment holding company with interests in the mining, real-estate, manufacturing and processing sectors – also went south. Three days before the 8 May election ABW’s share price stood at PHP14.00; on 30 June, prior to Duterte’s “oligarch” comments it was down to PHP12.80; on 9 August it closed at PHP9.66. So, ABW shares have lost 31% of their value since Duterte was sworn into office – 24.53% of that fall coming in the wake of its chairman’s public shaming.

Duterte believes that Ongpin – a Trade and Industry minister in the government of Philippine strongman, Ferdinand Marcos – has used his political clout over decades to further his personal gain. PhilWeb’s founder has a personal wealth of US$900 million and is the country’s 20th richest individual according to Forbes magazine’s 2015 Philippines’ 50 Richest. His main corporate interests revolve around mining, energy and real estate. The reason he gave for stepping down from PhilWeb, which was originally incorporated as a mining company, was to focus on real-estate company, Alphaland, where he is CEO. He is now putting his stake 53.76% stake in the company – 771,700.000 shares – up for auction. Bids will close on 17 August.

Ongpin, however, is no stranger to controversy. The Securities and Exchange Commission recently banned him from sitting on the board of a public company and fined him PHP174 million – PHP1 million for each of the 174 cases of insider trading involving Philex Mining Corporation shares for which the SEC had found him responsible. These offences go back to 2009 when Ongpin was vice president of Philex. He has been a Philex director since 2007. Although the SEC decision was later overruled by the Court of Appeals – the court awarded Ongpin a 20-day temporary restraining order on 1 August – the securities-market regulator has pledged to make good its ruling.

PhilWeb’s 90,000 e-Games members play casino games – baccarat, blackjack, slots and video poker, plus sports betting – on more than 8,800 terminals across the company’s 286 outlets, which are staffed by 5,000 workers. It has around 1,500 stockholders and in 2015 it recorded revenues of PHP1.67 billion (US$35.74 million). Trading in PhilWeb shares which was suspended on 10 August will resume on 24 August.