MANILA -- A spectator in a horse race can buy a ticket to place his or her bet, but that does not come with ownership of the animal, the former head of the Philippine Stock Exchange said Wednesday, explaining the PDR system.
Philippine Depository Receipts or PDRs give the holder the right to receive dividends from the issuer and the right to convert the PDRs to shares of stock, but only if he or she is qualified, said former PSE president and ACCRA Law senior partner Francis Lim.
One of the issues raised against ABS-CBN by Solicitor General Jose Calida is that the network issued PDRs to foreigners in violation of the Constitution. ABS-CBN said the PDRs, issued by its holding company, were “evaluated and approved” by the Securities and Exchange Commission.
"It's like buying a ticket in order to bet on a horse. You don't own the horse, but if that horse wins, you have a share in the winnings," Lim told ANC's Early Edition.
"At most, what it gives you is the right to own a share but that right is subject to law. For example, if you are a foreigner ,you cannot convert it into a share in ABS-CBN Corp because you are disqualified from owning," he said.
"All it gives you is the right to receive dividends from the issuer," he said. In ABS-CBN's case, the issuer of the PDR is ABS-CBN Holdings.
"It's ABS-CBN Holdings Corp, the holding company of ABS-CBN Corp, that owns shares in ABS-CBN Corp, together with other stockholders. A PDR holder is not even a shareholder of ABS-CBN Holdings," he said.
A PDR is different from shares of stock, whether common or preferred, which gives the holder voting rights. Preferred share holders also get some rights that common share holders don't have, he said.
"Common shares mean ownership and the right to vote and the right to receive dividend. A PDR gives the holder the right to convert into shares if he is qualified," he said.
Other Filipino companies issue PDRs, same with companies outside the Philippines that issue depository receipts, sometimes called depository receipts depending on the market.
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