Questions linger about the bold and risky move of the state pension fund Government Service Insurance System (GSIS) of accumulating shares of Metro Pacific Investments Corp. (MPIC) amid its delisting from the stock exchange.

From 23 August to 4 September last year, GSIS snapped up shares of the private company to increase its stake from three percent to approximately 11.98 percent, or 3,438,549,038 shares, of the total outstanding common shares of MPIC.

The Commission on Audit (CoA) stated in a 2023 report that GSIS had invested P34.5 billion to secure 11.56-percent ownership of MPIC.

The investment, based on the CoA report, was the biggest exposure of GSIS in a private firm.

According to the state auditors, before the 9 October 2023 voluntary delisting of MPIC, the GSIS acquired an additional significant number of shares that qualified it for a board seat. This paved the way for the election of GSIS president and general manager Wick Veloso to represent GSIS on the board of MPIC.

An analyst noted that “what the bigger chunk of GSIS infusions in MPIC meant was a board seat. In the end, GSIS played ball, saying it would neither oppose the buyout nor sell its shares.”

The maneuver resulted in huge gains, not for the state employees who are members of GSIS, but for Veloso.

It was a glowing public image coup for the GSIS boss with some analysts saying that “it is rare for a government institution to display such prowess in the realm of strategic market trading.”

A bigger gain for GSIS members would have been taking the buyback after GSIS upped its stake. “GSIS, however, declined the buyback offer, leaving it with one seat in a 15-person board, which seems slim leverage overall although such a seat would be a plum post,” according to a trader.

Pundits said GSIS could, of course, sell its chunk to the consortium at a later date at a higher price, and with much less in the way of public attention.

The private investors in MPIC did not take the moves of GSIS sitting down.

On 15 December 2023, GSIS subscribed to an additional 186,771,260 shares through the capital call of MPIC at a subscription price of P5.20 per common share.

The proceeds of the new share issuance may be used by MPIC to, among other things, support investments, reduce head office debt, and potentially buy back the remaining minority shareholders of the company under terms set by MPIC, according to the CoA report.

As a result of the new share issuance, MPIC will have 31,569,338,752 total issued and outstanding common shares.

The capital call resulted in a reduction in the percentage share of GSIS in the company from 12.06 percent to 11.56 percent of the outstanding common shares as of 31 December 2023, according to CoA.

Some pundits warned against allowing Veloso to have his way in GSIS.

During Veloso’s stint as head of the Philippine National Bank (PNB), the Lucio Tan Group (LTG) banking unit booked a total of P19 billion in total provision for bad loans in the first half of 2021, P16.9 billion of which was incurred in the second quarter.

Aside from a mountain of bad loans, PNB also saw its net interest income drop by three percent to P16.85 billion, and trading and foreign exchange gains fell 57 percent to P1.58 billion.

In contrast to PNB’s poor results, LTG’s other subsidiaries showed excellent financial results.

Veloso’s recent actions may have confirmed concerns that his bold, daredevil approach — common in the corporate world — have gone beyond the prudent investments required for the state fund, putting the pensions of millions of state workers at risk.