Alliance Global’s rounding error caused EMI float reporting problem

Alliance Global [AGI 6.71, up 0.8%] [link], the Tan Family’s conglomerate, replied to the PSE’s inquiry about the public float of its subsidiary, Emperador [EMI 12.18, up 0.2%], after questions were raised by Mike Tan of Vai Analytics regarding AGI’s report that it held 81% of EMI. If true, that stake would imply a maximum public float of 19% which would be in violation of the PSE’s 20% minimum public float rule. In response, AGI said that it made an “unintentional and inadvertent mistake” in Q3 of 2021, when it “rounded-off [its] percentage of effective ownership” of EMI stock, and carried that rounded figure over into future periods. AGI said this could be blamed on a typing or encoding error, a rounding error, bad reference data, or “mathematical error in the computation itself.” AGI claimed that since the mistake appeared in the “Notes” section of the report, it “does not have a material impact on the subject Reports as a whole”, and further diminished the size of the error by framing it as “purely a result of unintentional human error.” AGI said that its EMI shareholdings are correctly reflected in EMI’s Public Ownership Reports, and that there is no discrepancy between AGI’s and EMI’s records. 

MB bottom-line: It took two pages for AGI to basically admit that it messed up and committed a basic rounding error. Instead of rounding to two decimal places, they may have “aggressively” rounded to a whole number, and the difference is what caused AGI to mistakenly report a higher ownership stake in EMI than was actually true. (AGI in the background, yelling: IT WAS ONLY IN THE NOTES SECTION. IT’S NOT THAT IMPORTANT. CAN WE STOP TALKING ABOUT THIS ALREADY?) As to whether it was material or not, that’s a harder question. Sure, EMI’s price dipped significantly after the tweet was published, but I’m not in the head of the thousands of people who bought and sold. I don’t think AGI’s “it’s just the notes, bro” excuse holds a lot of water, but I also don’t think that most who saw the original tweet were convinced that EMI was in violation of the minimum float rule. I think the original tweet exposed a basic (but important) mistake that AGI definitely needed to correct, and it provided the sunlight needed to bring AGI’s attention to the problem. The uncertainty was resolved. Good work, Mike. Good work, PSE. Don’t be spicy, AGI.

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.