The ruling by the Philippine Securities and Exchange Commission to revoke the certificates of incorporation of Rappler Holdings Corporation and Rappler, Inc. is an unfortunate interpretation of Filipino law that reduces press freedom and independent news coverage in the Philippines.
The SEC ruling holds that the issuance of Philippine Depositary Receipts (PDRs) to Omidyar Network were in violation of the Constitution of the Philippines, which states that the ownership and management of mass media entities must be limited to Filipino citizens or entities wholly owned and managed by Filipino citizens.
PDRs are structured to allow Filipino companies to access international funding while retaining sole Filipino ownership and control. PDRs do not provide the holder any ownership of shares in the underlying entities. These financial instruments are aligned with the Constitution and have been issued by various holding companies of leading media and telecommunications companies in the Philippines, including some whose PDRs are registered with the Philippine Securities and Exchange Commission and listed and traded on the Philippine Stock Exchange. Furthermore, the SEC did not raise any challenges when the PDRs were first issued in 2015.
In accordance with the Constitution and laws of the Philippines, Omidyar Network does not own any shares in either Rappler Holdings Corporation or Rappler Inc., nor does it have any voting rights, management responsibilities or any other form of control in either company, nor any editorial input in Rappler.
Rappler Inc., which operates an independent, social news network, is wholly owned and controlled by Filipino citizens and entities that are wholly owned and controlled by Filipino citizens.
We understand that Rappler proposes to file motions to challenge the SEC order.