Showing posts with label IPO. Show all posts
Showing posts with label IPO. Show all posts

Monday, July 21, 2025

The PLUS Economy: A Symptom of Policy-Driven Bubble


All is not hopeless. Markets are turbulent, deceptive, prone to bubbles, infested by false trends. It may well be that you cannot forecast prices. But evaluating risk is another matter entirely—Benoit Mandlebrot 

In this short issue

The PLUS Economy: A Symptom of Policy-Driven Bubble

I. The Philippine Gaming Bubble Is Bursting in Real Time

II. Implications: Sucked into a Cesspool of Losses

III. The Buyback Mirage

IV. The Deeper Malaise: A Speculative Society

V. Financial and Economic Policies as Catalysts; CMEPA: A Gamified Economy in the Making

VI. Regulators to the Rescue?

VII. The Damocles Sword Overhead: San Miguel’s Plummeting Share Prices

VIII. Conclusion: A System Engineered for Bubble Blowing 

The PLUS Economy: A Symptom of Policy-Driven Bubble 

Fiscal fragility and easy money laid the groundwork for a drift to a casino economy; tax distortion threatens to ignite the speculative tinder 

For continuity, this post follows my earlier piece: "The Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble" 

I. The Philippine Gaming Bubble Is Bursting in Real Time 

Trading activity now reveals raw emotion driving wild pendulum swings. 

As summarized:


Figure 1 

DigiPlus Interactive Corp. [PSE: PLUS] surged 15.7% on Friday, with turnover hitting Php 2.33 billion—an all-time high—accounting for 31.75% of mainboard volume! This marks the second-highest volume share after the July 4th collapse of 23.9%, when PLUS’s share skyrocketed to 33.33%. Friday’s rally mirrored the July 7th oversold recoil of +14.6%, when volume share hit 30.2%, the third highest on record. (Figure 1) 

This incredible volatility, backed by stunning trading volumes, shows that the bubble's deflation is still very much underway. 

II. Implications: Sucked into a Cesspool of Losses 

PLUS’s massive footprint in PSE volume underscores how deeply—both retail and institutional players—are entangled in its downside volatility vortex—sucked into a cesspool of losses, where investors have morphed into gamblers.


Figure 2

Many who suffered losses are pouring in more—anteing up or doubling down on losing positions to lower their average entry, hoping that a recovery might redeem them or restore their capital. This Martingale approach—catching a falling knife with both hands—only heightens the risk of ruin. (Figure 2, upper image)

Moreover, nursing drawdowns, many retail accounts will be sidelined, deactivated, or rendered inactive. 

Worse, we don’t know how much of this frenzy is credit-fueled or margin-driven. 

Yet, the biggest question: how exposed are financial institutions—and how compromised? 

III. The Buyback Mirage 

Bulls have pinned hopes on a Php 6 billion buyback. 

But as shown above, it’s a smidgen of total trade—worth less than this week’s volume. 

Down by 40.2%, PLUS’s weekly turnover hit Php 6.4 billion, or 19.3% of mainboard volume—an all-time high. 

Yet, the buyback is not capital formation—it’s capital consumption. Its intent is to support a price bubble, an unsustainable dynamic. Instead of being channeled into productive activity, capital is consumed in positional losses, resulting in both income shortfalls and balance sheet erosion. 

Other gaming issues, Bloomberry Resorts Corporation [PSE: BLOOM] and Philweb [PSE: WEB], likewise plummeted 6.32% and 17.4% week on week, respectively, reinforcing their recent price declines. (Figure 2, lower graph) 

IV. The Deeper Malaise: A Speculative Society 

This episode reveals just how desperate the market has become for a return to the bull days of the PSE. Chasing yields at any cost has become the new normal. 

But the gaming bubble is a symptom, not the disease. 

The gambling boom has gripped not only ordinary people reeling from inflation, but has also migrated into the PSE itself. 

The PLUS bubble has become a second front for digital gamblers. Or put differently, casino-style gambling has migrated to the stock market. 

Media and gaming apologists have deflected focus to the politics of a potential gambling ban. 

Yet given the sanctimonious cries of social democratic politicians who campaign to ban everything unpopular—should regulators now ban the stock market, too? 

Remember: drugs were the political obsession of the last administration. Now, gambling is the new public enemy. 

The war on POGOs has now morphed into a broader war on gambling. But do prohibitionists really think they can control human behavior through force alone? Will they succeed in imposing virtue—or will they help blow up the fiscal position (already at risk of hitting another record deficit) and magnify systemic corruption? 

Yet, haven’t you noticed? A political trend with every new administration is the use of its coercive political machinery to wage war against an unpopular minority—portrayed as evil. From drugs, to POGOs, to speculative finance—public enemies are manufactured, and the cycle repeats. 

These symptoms are not new.


Figure 3

The unraveling of the 1999 BW Resources bubble was followed by another boom-bust episode with the 2000 SSO-Philweb merger. These misallocations ultimately dragged the Phisix (now PSEi 30) to its knees by 2002. (Figure 3 upper diagram) 

Are we seeing echoes of that dynamic now? 

V. Financial and Economic Policies as Catalysts; CMEPA: A Gamified Economy in the Making 

Is this what the government had in mind with the Capital Market Efficiency Promotion Act (CMEPA)—a gamified economy modeled after PLUS? 

Read our earlier post on CMEPA "The Seen, the Unseen, and the Taxed: CMEPA as Financial Repression by Design" 

The claim that CMEPA is a tax reform to “benefit stocks” via reducing the stock transaction tax (STT) is superficial at best—a textbook case of the fallacy of division. 

In truth, CMEPA is a reprogramming of the public’s incentive structure—for households, corporations, and even government—towards short-termism, speculation, and consumption. 

Its standardized 20% tax on net income punishes savers, forcing them to seek speculative outlets—exactly what STT “reforms” aim to do. 

Add to this the BSP’s easy money and the crowding-out effects of deficit spending, and you have a perfect recipe for a bubble economy—the PLUS economy. 

Savings and borrowed money alike are being diverted into asset punts—not just in stocks, but in property as well, enabled by the BSP’s distorted, inflated Property Price Index. 

As part of the grand policy of inducing speculative juices—or animal spirits—in the real estate sector, the Social Security System (SSS) reportedly acquired Php 500 million worth of shares in Century Properties Group [PSE: CPG] via a special block sale. The purchase, equivalent to a 6.39% stake, was executed at a discount to market price. (Figure 3, lower chart) 

Since hitting its trough in Q2 2024, CPG’s share prices have more than doubled! 

This move not only signals institutional participation in the speculative drift but also raises questions about how public funds are being deployed to stimulate asset inflation. 

When pension reserves chase yield in property equities—backed by inflated indices and easy liquidity—it reinforces the very fragility the system claims to hedge against. 

VI. Regulators to the Rescue? 

Interestingly, regulators floated the idea of mandatory listings for online gambling firms—in the name of “transparency.” Was this a disguised attempt to rescue PLUS’s hissing bubble? 

Has the PSE been so starved of IPOs that it enlisted the help of regulators to bankroll listings—using mandates and the CMEPA’s policy nudges?


Figure 4

As of Q1 2025, the PSE has posted only one IPO (Topline Business Development, PSE: TOP) against two delistings (voluntary/involuntary)—Philab (DNA) and Keppel Philippines (KPH-KPHB). (Figure 4, upper visual) 

This proposed mandate reveals how authorities increasingly perceive the value of the stock market: a dopamine-laced feedback loop for short-term thrills or a market that hopes to accomplish "something for nothing" or share price inflation built on momentum and easy money. The very definition of a bubble. 

VII. The Damocles Sword Overhead: San Miguel’s Plummeting Share Prices 

As political and market attention fixates on gaming, another looming threat quietly unravels—the Damocles Sword hanging over the markets and the economy: San Miguel Corporation—a Php 1.5 TRILLION+ debt colossus—continues to see its share prices erode as liabilities climb—another potential catalyst for broader market instability. (Figure 4, lower window) 

VIII. Conclusion: A System Engineered for Bubble Blowing 

DigiPlus may be the flashpoint, but the broader market pathology runs far deeper. This is no rogue episode—it is the byproduct of a system engineered to reward velocity over value, status over functionality, dopamine over discipline. 

The convergence of fiscal fragility, monetary excess, and misaligned incentives has transformed the capital market into a gamified arena—one that pulls in both institutions and households into a void of unproductivity and capital consumption. 

CMEPA doesn’t fix this system— it formalizes its dysfunction. It deepens its institutionalization. 

The danger isn’t just the collapse of PLUS. It’s the normalization of a casino economy.  


Wednesday, May 03, 2023

Is the Delisting of Metro Pacific a Bullish or Bearish Sign for the Philippine PSE?

  

Is the Delisting of Metro Pacific a Bullish or Bearish Sign for the Philippine PSE? 

 

Is the delisting of MPI a bullish sign for the Philippine PSE?   Our brief inquiry is premised on the prism of the health of the capital markets, MPI's liquidity conditions, and socionomics. 

 

Manila Bulletin, April 27: (bold mine)  

Metro Pacific Investment Holdings Company (MPIC) is planning to voluntarily delist from the Philippine Stock Exchange after a P48.4 billion tender offer by a consortium of its significant shareholders and Mitsui of Japan. In a disclosure to the Philippine Stock Exchange, MPIC said it has received the Tender Offer Notice from a consortium consisting of Metro Pacific Holdings, Inc. (MPHI), GT Capital Holdings, Inc., Mit-Pacific Infrastructure Holdings, Inc. (MPIH), and MIG Holdings Incorporated. MPHI is a member of the First Pacific Group owning 46.1 percent of MPIC while MPIH is a joint venture of Mitsui and Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development…In a disclosure to the the Hong Kong Stock Exchange, First Pacific said “The Bidders feel that the intrinsic value of MPIC’s core investments in infrastructure in the Philippines has not been fully reflected in MPIC’s share price for some time.” “The tender offer and successful delisting will allow MPIC’s minority shareholders to realize a significant premium over historical share prices of MPIC,” it added. The firm noted that, “At the same time, a delisted MPIC will be better aligned with the objectives of the Bidders to continue investing in long-term infrastructure projects supporting sustainable economic growth in the Philippines.”  

Does the delisting of Metro Pacific signify a bullish sign to the Philippine stock market? 

 

Well, for some people, it is. 

 

The following explains our humble two cents (only our opinion—not a piece of advice). 

 

In the first place, Metro Pacific is an incumbent member of the elite PSEi 30. 

 

Second, the delisting represents a paradox to the goals of the Philippine Stock Exchange (PSE). The PSE has been actively recruiting firms to list. It aims to increase its membership so the PSE can improve its finances. It targets 14 IPOs this year 

 

But then a member of the PSE pulls out!  Also taken private last February was the erstwhile listed Eagle Cement!  Great.   

 

Third, developing the capital markets (financialization) requires the enlistment of more publicly listed equity and fixed-income securities.  More companies would have access to the public's savings.  Savers may benefit from capital appreciation and dividend/coupon yields of the issued securities.   The public may price shares or fixed-income securities against perceived risk-reward tradeoffs based on the discounting of their future financial performance. 

 

Prices of securities may underpin the collateral values for borrowing.  Based on its market values, equities may help fund various corporate deals, including M&As. 

 

So how will MPI's pullout improve the capital markets? 

 

Next, the news quoted its largest stockholder, First Pacific, stating that "the bidders feel that the intrinsic value of MPIC’s core investments in infrastructure in the Philippines has not been fully reflected in MPIC’s share price for some time."   

 

Have they implied that MPI's pullout represents a "market failure" via share mispricing? And the delisting, thus, marshals this enticing opportunity exclusively to the principal shareholders? Or are they blaming the market for being blind to the profitable opportunities presented?    

 

The thing is, the consensus assertively claims that a bull market is around the corner.  

 

In this case, should a bull market become apparent, could the market not price its share much higher than the tender offer? Therefore, would MPI not suffer a substantial "opportunity loss" by withholding public participation? 

 

Or, if the current majority shareholders are "confident" of the firm's "intrinsic value," why not allow the markets to share this sentiment? 

 

That is, why the choice of mark-to-model instead of mark-to-market? 

 

Or, could it be that the prospects of a bull market and the roseate fundamentals for the firm signify "elusive" aspirations? 

 

But there could be more. 

 

Could MPI’s principal shareholder have been suggesting that the market’s inability to seize and take advantage of its "intrinsic value...for some time" extrapolates to possible signs of emerging liquidity drought?  

 

Let us do a few numbers. 

 

In MPI’s 2022 annual report, its outstanding debt of Php 292.467 billion in 2022 was up 18.7% from Php 246.342 billion, or an increase of Php 46.13 billion!  It reported a net income of Php 13.14 billion, up by 13% from Php 11.7 billion a year ago.  Net debt represented 3.5x the annual marginal gains of net income. Meanwhile, the company's cash reserves dived by 25% to Php 33.6 billion in 2022 from Php 44.9 billion in 2021. Also, MPI’s market cap as of April 28 was Php 122.245 billion.  So in 2022, debt eclipsed its income, while outstanding debt signified over twice its market cap! 

 

I could be wrong; however, does the unrecognized/unappreciated "intrinsic value" constitute the outgrowth of debt over income in the face of falling cash reserves? 

 

Could taking MPI into the private indicate its undertaking remedial liquidity measures through ownership restructuring—post-delisting? That's a guess, though.

 

And let us consider the sentiment.  

 

Is the route to MPI’s exclusivity a symptom of their leadership’s mounting vulnerability? 

 

Aside from compliance costs, is public scrutiny not the primary difference between an exclusive and publicly listed firm?  

 

Is MPIC withdrawing from the public's eye because of this? 

 

It can't be a positive sign to the capital markets when PLDT revealed last year that it overspent by some Php 48 billion in the last four years.   It means that from 2019, their financial reports understated the costs and overstated the income, as previously discussed. 

 

Have the private regulator and authorities, represented by the PSE, SEC, and BSP, done enough to protect the investing public, especially the minority shareholders, and other stakeholders? 

 

And could it be a coincidence that PLDT and MPIC share the same Chairmanship?  

 

We are not interested in intrigues. But could there be a relationship between the recent developments in PLDT and the delisting of MPI?  Or could these incidences represent merely a coincidence?  


Historian Charles Kindleberger presciently wrote that different forms of corporate malfeasance occur on market tops or during bear markets. 


Our task is not to scrutinize this but to see how the current events affect the capital markets.  

 

And based on the field of socionomics, the avoidance of scrutiny could be a sign of vulnerability or a substantial erosion of confidence. 

 

This tweet from Adjunct Professor and Author Peter Atwater explains:  

Environments of low confidence are "Eras of Revelation" - when what was overlooked, ignored, or unspoken, all comes out into the open. Scrutiny naturally rises as confidence falls.  

In all of this, yet a bullish sign from MPIC's delisting?