PSE sanctions First Gen over disclosures

The Philippine Stock Exchange (PSE) has sanctioned First Gen Corp. for violating multiple disclosure rules.

This came months after the company came under scrutiny over its handling of disclosures related to its multibillion-peso transactions with Prime Infrastructure Capital Inc. and the provisions that later became central to the Lopez feud.

In a notice dated July 9, the PSE said First Gen violated Sections 1, 2, 4.1, 4.2, 4.3, 4.4(u)(ii) and 16 of Article VII of the Consolidated Listing and Disclosure Rules.

Penalty not stated

The PSE, however, did not disclose the specific penalty imposed.

The sanction stemmed from a months-long disclosure controversy involving First Gen’s transactions with tycoon Enrique Razon Jr.‘s Prime Infra, particularly the change of management control provisions embedded in agreements covering the sale of a majority stake in the company’s gas business.

The provisions only came to light after members of the Lopez majority opposing First Gen president and CEO Federico “Piki” Lopez disclosed their existence while seeking his removal from the company and other Lopez-led firms.

The majority group led by Eugenio “Gabby” Lopez III had argued that the clauses exposed First Gen to significant financial risks because they could allow Prime Infrastructure to acquire certain assets at a 25-percent discount if specified changes in management occurred during the agreed protection period.

Following questions from the PSE, First Gen first acknowledged the existence of the provisions in April before issuing expanded disclosures in May detailing how the clauses work and the circumstances under which they could be triggered.

Throughout the controversy, First Gen maintained that the provisions had been part of the original binding commercial terms agreed with Prime Infra and were intended to protect its investment partner against unexpected changes in management during the development period of the projects.

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No broad impact

From a market perspective, however, the sanctions are unlikely to have a broad impact on the stock or the wider market, according to Trading Edge chief investment strategist Ron Acoba.

“This has no bearing in general, or as a whole, except if you’re an investor” in the company, Acoba said.

He said the PSE’s action is more relevant to shareholders of First Gen, as it pertains to the company’s compliance with disclosure rules rather than their operating performance or business fundamentals.

The PSE’s latest action marks the first regulatory sanction arising from the disclosure issues that emerged during the Lopez family dispute.