Media giant GMA Network will be buying its Philippine Depositary Receipts (PDRs) from the market, months after rival ABS-CBN was denied a congressional franchise.

In a special meeting on Tuesday, August 11, the network’s board of directors approved to purchase the PDRs issued by GMA Holdings at closing price on Tuesday or lower. The price of GMA PDRs closed at P4.56 on Tuesday.

The buyback will be effective immediately and up to October 31.

After the purchase, the PDRs will then be converted into common shares. This means that foreigners will no longer be able to use PDRs to invest in GMA Network.

GMA said the PDR buyback is “a measure of protection of the investments held by non-Filipinos,” after the House committee on legislative franchises slammed ABS-CBN’s use of the financial instrument.

GMA noted that the issuance of PDRs “might be affected by the findings and recommendations” of lawmakers on ABS-CBN’s bid for franchise renewal.

A PDR is a financial instrument that allows foreigners to invest in a media company without violating the constitutional rule that media companies should be 100% Filipino-owned.

Investors, Filipino or not, will be entitled to the dividends of the company, but they have no right to vote and are not considered shareholders.

With PDRs, companies like GMA can raise funds for future plans and projects.

PDRs and investor sentiment

Legislators earlier questioned ABS-CBN’s PDRs, as it was supposedly a way to skirt investment restrictions. In a House hearing, however, the Securities and Exchange Commission (SEC) stood by the legality of the financial instrument.

Solicitor General Jose Calida also went to the Supreme Court, accusing ABS-CBN of allegedly circumventing the Constitution.

Legal and business experts earlier warned that the government’s move against the use of PDRs would hurt investor confidence. (READ: EXPLAINER: Is Calida’s ABS-CBN PDR theory bad for business?)

PDRs and Rappler

The issue of PDRs was also launched against Rappler.

Rappler issued PDRs to two foreign investors: Omidyar Network and North Base Media.

Upon the initiative of Calida, the SEC issued a shutdown order against Rappler in 2018, after finding allegedly questionable terms in the PDRs of Omidyar.

In the same year, Omidyar donated the PDRs to Rappler’s managers, effectively eliminating the sole basis of the SEC’s shutdown order. 

For the North Base Media PDR, the SEC itself said there was “nothing illegal or irregular” with that PDR. – Rappler.com