Singapore—A blogger claimed news site Rappler is foreign-owned, but showed legal documents proving it is Filipino-owned. Corporate law and accounting students will enjoy Rappler’s latest spat with those it calls “paid trolls.”

Rappler was accused of selling Philippine Depositary Receipts (PDRs) in violation of our Constitution’s Article XVI, Section 11: “The ownership and management of mass media shall be limited to citizens.”

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Note our Constitution predates the internet. It is silly to apply this to websites and social media, even a foreign tourist’s travel blog.

Not naming the blogger, Rappler explained: “Our foreign investors, Omidyar Network and North Base do not own Rappler. They invest, but they don’t own. …

“Ano ba ang PDR? These are financial tools that individuals or entities can use to invest in a company that they believe in. In fact, they’re putting in money even if they cannot vote on the board, don’t have a say in management, and are not part of day-to-day operations. In short: Ganun sila kabilib! (They believe in us that much!)”

Intenseful!

This needs interpretation, clarification and context.

We teach that ownership is a bundle of legal rights. If you buy a house, you may live in it. Let someone else live in it. Turn it into a Big Brother house. Tear it down.

You may also trade a right. If you rent out the house, you may no longer enter but get paid rent. You may even let someone else rent it out and keep the income.

Owning a share in a company is a bundle of legal rights.

You may sell it. Receive dividends. Vote at a stockholders’ meeting. Receive assets left if the company goes bankrupt.

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A PDR is a financial instrument that gives rights similar to some, but not all, of these.

In 2013, ABS-CBN Holdings (ABSH) issued 57,836,900 PDRs for P2.5 billion and purchased 57,836,900 shares in media giant ABS-CBN. ABSH’s PDRs trade on our stock exchange separate from ABS-CBN’s shares.

ABSH’s prospectus, available online, says PDR holders have two rights. First, when ABS-CBN gives cash or stock dividends, ABSH gives matching cash or PDRs.

Second, the PDR may be exchanged for an ABS-CBN share. If the PDR holder is not Filipino, he receives the cash equivalent, never the share.

A PDR holder may not vote in ABS-CBN’s stockholders’ meeting or demand other rights from it. He is not an owner. His rights are solely from ABSH.

GMA Holdings has similar PDRs. Rappler’s PDRs are private but likely similar.

The blogger uploaded 2016 General Information Sheets of Rappler Inc. and Rappler Holdings. These are filed with the Securities and Exchange Commission (SEC) and open to the public. But these listed all stockholders as Filipino.

The blogger also uploaded audited financial statements and asked why Rappler Inc.’s showed P170 million of new shares in 2015, yet Rappler Holdings’ did not.

This matches PDR convention. ABSH’s 2013 financial statements explain its PDRs in Note 4, not the statements themselves. Note only partial Rappler financial statements were uploaded, lacking the notes.

In 2013, after the Gamboa decision against PLDT, the SEC drafted new rules on foreign ownership restrictions. PDRs were discussed and allowed, as ABSH’s have been since 1999.

The Constitution also grants right to property and freedom to contract. Applying broader than prescribed restrictions diminishes these—and our stock market.

But the real point is we must support President Duterte in liberalizing outmoded constitutional restrictions. In 2014, then Philippine Bar Association president Beda Fajardo and I proposed to Congress a simple amendment to this. Filipinos in 2017 must have full access not just to foreign capital, but also to accompanying markets, technology and networks of contacts.

Rappler quoted Mocha Uson claiming it “is allegedly funded by the (US Central Intelligence Agency),” then replied, “LOL!” Bashers spread memes of its GIS saying it does “property and investment development” and “SPO4 Pia Rañada-Robles.” One hopes the spat continues to amuse using more accurate legal terminology.

React: [email protected], Twitter @oscarfbtan, facebook.com/OscarFranklinTan.

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