What’s Winston Up To?

June 1, 2008

According to ABS-CBN, Winston Garcia bought 10% of Meralco last February.  If it was a market transaction, he must have spent at least P8.50 billion (110 million shares for about P78/share).  As he vied for a management takeover, the price of the stock has plumetted to about P60/share.  He’s lost about P2 billion or 25% of the GSIS investment.  And he didn’t even succeed at taking over the company. 

The attempt (and continuing efforts at take over) negatively affects the stock price because we all know that if he succeeds, a government-run company would probably be less efficient.  We don’t have to look further than NAPOCOR to see that this is almost gospel-truth.  

But let’s assume the best case scenario for Mr. Garcia.  Assume he succeeded in driving down Meralco’s “excessive profits” down. That would also drive the stock price further because stock prices reflect future profits. (Unless, of course, Mr. Garcia can demonstrate that lower prices will not come at the expense of profitabiilty and long-term viability.)

So, if he loses, the stock price goes down.  If he wins, the price goes down.  What can this mean? The only conclusion is that Mr. Garcia bought the shares with the certain outcome that the price would go down. That must have been his intention. 

As a dues-paying member of the GSIS, I’d really like him to explain how this furthers the interests of GSIS members.  If he wants to benefit the general public, that’s fine. But does he have to use GSIS funds and affect my future benefits?  GSIS is not an agency that promotes public welfare.  It’s primary purpose is to promote the welfare of its members.  Somehow, this point is lost on Mr. Garcia.

Even funnier was yesterday’s headline where the government is considering spending P2 billion as  subsidy (read: dole out) to help consumers with their electricity expenses for 10 months.  Well, if Mr. Garcia is so certain that he can permanently reduce the price of electricity by taking over Meralco, he should encourage the government to use the money to buy up more Meralco shares.  Why isn’t he doing that?  

It’s been reported that the money is coming from the P14 billion raised from VAT on electricity.  Well, why not use all that money to buy another 20% or so of Meralco (it’s cheaper now, thanks to Mr. Garcia)?  That should be enough to kick the Lopezes out.

So, what now, Mr. Garcia?  If you were an investment banker, I think you’d have lost your job losing P2 billion in a matter of weeks. But government and politics are peculiar that way.  The bottom line is not always about profits.  The P2 billion loss suffered by GSIS must have benefited somebody in some form or another.  If not, then why did you do it?