If there is any story on trading irregularity that sounded more like fiction than real because of the unbelievable nature of its violation and equally unbelievable timid reaction by concerned regulators to go after the perpetrators up to this writing – notwithstanding that it happened three years ago – it is about the stock manipulation in Abra Mining and Industrial Corporation (AR).

Just over the weekend, I had an engaging chat on stock investing and investor protection in the US with a balikbayan uncle of my wife. Her uncle and wife are now retirees with dual citizenship, to obviously spend here their hard-earned pension kitty, which grew comparatively larger than the retirement portfolio of their co-employees because of their preference for investing in stocks, nurtured by the better environment on investor protection in the US.  

As pointed out by them, despite the scandals on stock manipulation and insider-trading, the US capital market has remained robust and the biggest due to the firm and serious attitude of the regulators on investor protection.  Violators and perpetrators of irregular trading activities are assiduously pursued and made to face justice.

We had a grand time recalling the stories of the big heroes and villains in the turbulent times of the eighties and nineties that almost destroyed Wall Street. These were the legendary arbitrageur Ivan Bosky, junk bond king Michael Milken, and star investment banker Martin Siegel, to mention a few. 

Bosky was charged – and pleaded guilty – to insider trading and fined US$100 million. He served three years in prison and became an informant.

Michael Milken was known for developing the high-yield bond market, which earned him the nickname “Junk Bond King.” He was indicted for securities fraud and served 22 months in prison at the same time penalized a huge fine of $600 million. He was granted a full pardon on February 18, 2020 by then-president Donald Trump.

Star investment banker, Martin Siegel, was convicted along with Ivan Boesky and Michael Milken, for insider trading.

What about Abra Mining?

Abra Mining was “incorporated on September 28, 1964 to engage in the exploration, development, exploitation, processing, manufacture, extraction, milling and sale of cement and metal concentrate, marble, building materials and other minerals such as copper, gold, silver, iron and lead.” 

Purportedly, the company’s business lines consist of the commercial utilization of limestone, lime, shale, silica, sand, gold, silver, copper, zinc, magnetite iron sand and other mineral deposits existing within the contract area. The company has four approved mining claims covered by duly approved Mineral Production Sharing Agreements with the Department of Environment and Natural Resources, namely, Bucay Baticang Limestone and Alluvial Gold Magnetite Project, Capcapo Gold Copper Project, Patok Gold Silver Copper Project, and The Sanvig Alluvial Gold and Magnetite Iron Sand Deposits.  It is also purportedly “engaged in the processing and manufacture of non-metals for industrial and commercial purposes at wholesale only.”

In early January 2020, Abra Mining named a new president and chairman. In the company’s disclosure on January 7, 2020 to the PSE, it said that its board in a meeting held a meeting the week before, on January 4, and had elected 59-year-old James G. Beloy as the new president and chairman of the board. He replaced his 83-year-old father, Jeremias B. Beloy. The young Beloy is a registered mining engineer, who holds a Mining Engineering degree from the University of the Philippines.

Prior to his election as chair and president, James Beloy was executive vice president and member of the board of directors of the company since 1994.  He was also president of Jabel Corporation, and an associate realtor and consultant of Melie G. Beloy Realty.

Other officers elected or elevated to higher positions in the company based on the disclosure were Joel G. Beloy, who was elected as a director to replace the position vacated by the older Mr. Beloy.  Joel Beloy was also appointed executive vice-president and chairman of the compensation committee.

As far as I could remember, Abra Mining is a dormant company that the news did not create any ripple in the market. The share price of Abra Mining ended flat that Monday on January 7, 2020 at P0.0014 each.

Irregularity in AR shares

Failing to create any stir a year before being “with no revenue and zero analyst coverage,” as described in the news, Abra Mining suddenly became the superstar of the whole Philippine stock market exactly a year after. 

As reported, Abra Mining “accounted for almost 80% of the Philippine market’s average daily transaction volume through February 3, 2021. . . it’s year-to-date gain peaked at 279% on January 19, 2021 when it closed at 1.1 centavos, the highest since December 2007 and above its 1 centavo par value.”  

The surge in Abra Mining was fueled by speculation that a new investor will come in to develop its gold mines.  

All these times, too, Abra Mining claimed that “it wasn’t aware of any information nor could it speculate as to the reason for the stock’s unusual price movements,” in response to perfunctory inquiries made by the Philippine Stock Exchange (PSE). 

Abra Mining shares closed at P0.0046 a piece on March 3, 2021 before trading was suspended the following day, which left many retail investors hanging with empty bags.  

Trading was suspended by the PSE on account of serious violations on its listing and disclosure rules and also of the Revised Corporation Code.  The gravest of which, according to PSE President Ramon Monzon, was “the lodgment and trading of Abra Mining shares which are not yet issued and recorded in the books of the Company and for which no subscription payments were received by the Company.”

The shares lodged with the Philippine Depository & Trust Corp. (PDTC) exceeded the number of the company’s listed shares. Only securities approved for listing should be lodged with the PDTC for trading.

Likewise, the number of shares lodged with PDTC exceeded the number of issued and outstanding shares as reflected from Abra Mining’s audited financial statements.  This meant that the shares that are not yet recorded in the books of the company have been lodged with PDTC and are being traded, in contravention of the provisions of the Revised Corporation Code.

According to culled figures, Abra Mining abetted the trading of 250 billion shares though it only had 99 billion listed shares.

The latest SEC Form 17-A report available in the PSE website about the company is that of December 31, 2021.  The company was reported to have no commercial operations, wherein it also basically remained a family-held corporation.  

The list in the SEC report were, as follows: James G. Beloy, Charman & President; Joel G. Beloy, Director and EVP, Compliance Officer, Corporate Information Officer and Data Privacy Officer; Premy Ann G. Beloy, Director and Asst. Treasurer, Compliance Officer and Corporate Information Officer; Amelia G. Beloy, VP – Administration, Chief Financial Officer and Corporate Secretary; Armando L. Javilinar, VP – Operations. External Auditor, Valdes Abad & Company, CPAs; Transfer Agent, Asian Transfer & Registry Corporation.

The way it looks, it’s plain and simple that regulators need not look further or dig deeper as to who to talk to about the fiasco. The inaction is all the more flabbergasting. No wonder poor retail investors who were left with the empty bags are now seeking legislative investigation.  

The chair of the House ways and means committee, Albay 2nd District Representative Congressman Joey Sarte Salceda, who is also a champion of promoting the development of the capital market, may be called to the rescue. – Rappler.com

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at densomera@yahoo.com.