The PSE threatened to suspend Manila Jockey Club [MJC 2.04 susp] and its publicly-listed subsidiary, MJC Investments Corp. [MJIC 1.52 susp], for failure to submit audited financial statements before the twice-extended deadline that (nearly) all other corporations were able to hit.
Both MJC and MJIC failed to comply, so the PSE suspended trading in both on Friday. MJC and MJIC join the rouges' gallery of corporations that failed, for one sketchy reason or another, to pull financial data together in time to report on a year that is further away than the start of 2020: Philippine Airlines [PAL 6.05 susp], Cyber Bay [CYBER 0.330 susp], and Abra Mining [AR susp].
The PSE’s rules regarding Certain Structured Reportorial Requirements are intended to hold companies to certain standards of reporting, first to shareholders, but also to the broader market. As a default setting, companies would prefer to show us nothing and simply release cherry-picked PR statements praising themselves for the best bits in the period and conveniently ignoring all of the unflattering stuff. Without rules like these, it would be very difficult for investors to make accurate comparisons between companies.
The challenge for the exchange, both as an institution and as a profit-seeking corporation, is in the enforcement of the rules: fines and sanctions are only so effective, especially if the reason for the non-compliance might best be described as “a complete lack of business activity in the period because the company is just a hollow shell waiting for a backdoor listing”.
It’s not clear what bought MJC and MJIC more time to file than the other companies that were suspended, but here we are.
Gaming stocks have been hit hard, but other gaming companies like Bloomberry [BLOOM 6.41 1.38%] and PH Resorts Group [PHR 1.92 2.04%] managed to submit their audited financial statements on time, even if they were dripping with red. Each investor/trader looks at different data for buy and sell signals, but for me personally, the inability to produce audited financials is a huge problem.
The nature and character of an organization might not be that important to traders that are using technical analysis and price-action metrics to find trading opportunities, but for longer-term investors (and for me in particular) these things can matter. In a 2017 study by Eli Bartov and Yaniv Konchitchki, How Missing SEC Filing Deadlines Affects a Company’s Stock Value, the authors examined the short-term and long-term consequences that a firm faced in the US for failing to provide quarterly and annual reports on time. Check out this link for an overview of the law review article.
The authors found that: (1) late filing of quarterly and annual reports had significantly negative impacts on a stock’s price in the short term, with the most negative impacts coming to those that cited “accounting problems” as the cause of the delay; (2) the negative impact was more pronounced for late quarterly reports than it was for late annual reports; and (3) late reporters, on average, performed poorly over the year following the late report (as measured by Return on Assets) and continued to exhibit negative negative impacts on the stock’s price for that period. Interesting study, right? I love this kind of stuff.
There are caveats all over the place here in terms of how this would apply to the Philippine market (the mechanisms for reporting are generally similar in intent, but specifically different in application), and how it would apply directly to MJC, PAL, or AR. Still, let me know your thoughts!