Abra Mining investors turning up the heat on SEC and PSE to resolve unlisted shares issue

Shareholders of Abra Mining [AR suspended] [link], together with stockbroker Victor Dominquez, are seeking a Congressional inquiry into “the alleged failure of the SEC and PSE to formalize charges against the executives of Abra Mining…” for their role AR’s sale of shares which were unlisted and unregistered during the “basura” (garbage) stock frenzy that heated up in late 2020 and overboiled in early 2021. In many ways, the PSE’s suspension of AR in March of 2021 killed the basura stock bull run. Thousands of investors were trapped in AR when it was suspended. The disclosure announcing the suspension didn’t mention any duration or consequences for the failure of the company to resolve the issue, but did say that the PSE would “inform the investing public” of any developments. Two weeks after suspending the stock, PSE President Ramon Monzon said that the suspension would remain until the issue was “satisfactorily resolved”, but said that “delisting the particular stock wouldn’t be helpful to investors because they’d get stuck with the security.” According to Bloomberg, Mr. Monzon said the SEC and PSE were “considering bringing a white knight into Abra Mining so that it remains publicly traded”. No white knight was produced. That was the last time AR was mentioned publicly by any officials of the SEC or PSE. The suspension on AR stocks remains to this day. In January of 2023, Mr. Monzon sent a reply letter to a law firm representing aggrieved AR shareholders. In it, Mr. Monzon said, “the PSE has concluded its investigation and noted serious violations of the company not only of the PSE Listing and Disclosure Rules but also of the Revised Corporation Code, the gravest being the lodgement and trading of AR 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.” In his pleas for a Congressional inquiry, Mr. Dominguez points to this letter as evidence that the PSE has failed to act despite possessing the necessary knowledge to do so. He is hoping an inquiry would lead to legislation that would attach criminal liability to officers of the SEC or PSE who fail to take action on known irregularities in similar circumstances.

MB BOTTOM-LINE: Mr. Monzon’s argument against delisting was fairly persuasive when the stock was first suspended. Basically, if the stock were immediately delisted, AR’s shareholders would just be left holding worthless shares with no market. But the argument that was persuasive back then has lost a lot of its bite over the three years that have come and gone since it was made. To AR shareholders, is owning worthless shares of a delisted stock any different than owning worthless shares of a listed-but-indefinitely-suspsended stock? No, it’s basically the same. Except that if the stock were delisted, perhaps the shareholders would have been satisfied to see some measure of justice done. While I’m not sure why Mr. Monzon felt it was appropriate to give the public impression (intentional or otherwise) of his personal involvement in searching for or brokering a potential sale of AR to mitigate the damage of the violations, that he would even consider getting involved in that way indicates (to me at least) that the rules and regulations were insufficient to handle the AR situation properly. I think Mr. Dominguez is right that more needed (and still needs) to be done. I’m just not sure that assigning criminal liability to the SEC and PSE is the answer. As an investor, I mostly want to know if the PSE’s house is in order to handle the next basura stock frenzy. Can this happen again? If not, why? If so, what tangible changes have been made that will improve the outcome for victims of such “serious violations”? We can’t just rely on time to heal wounds and individual personalities to do the right thing, because as this case demonstrates, it’s possible that neither of those things will end up happening with shareholders as the only ones left holding the bag.

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