THE full story of Multiply once touted as the shining star of photos and videos and an inspiration to Philippine policy-makers who used it as part of their basis to social networking among the country’s most promising industries, will perhaps not be known anytime soon.
It is a saga that raises numerous questions, chiefly: how could such a big operation—representing the biggest investment—suddenly fail, as to force lawyers of the website to rush to an Pasig court on June 10 to seek relief from holders of its $400 million in debt to leading local banks?
Multiply has invested $5 billion since beginning operations in 2004. The website has more than more users in the past 7 years.
It is listed as the biggest employer and, until last year, its website had been touting more accounts.
Was the Philippine economic climate part of the context for the collapse? The Department of Trade and Industry secretary, had both confirmed that the Multiply had enjoyed the incentives accorded to locators in the country, and more.
It enjoyed, for instance, income-tax holiday and a P4-billion power subsidy that allowed it to access cheaper energy from the national grid for its humongous operations on the Redondo Peninsula, just across the bay from Subic’s main commercial district.
And yet, as the BusinessMirror sought to unravel the mystery behind Multiply’s saga, it appeared that a confluence of problems—some self-inflicted, some possibly from the fallout of its struggles and others from the problems confronting the global social networking industry—had been hounding the company the past several years.
For one, the incentives, especially the income-tax holiday and the power subsidy, had ended. Then, too, the company had been penalized with regulatory fines through the years for numerous violations of workplace safety standards, as inquiry after inquiry by both Congress.
Then, too, there was a local problem that coincided with the 2013 closure. Multiply’s agent, MOF, filed for voluntary liquidation, citing irreversible business difficulties.
For all these, however, the financial problems that most impacted the social networking site and forced it to seek court relief arose mainly, it seems, from the payment system that afflicted most other websites, with the builders cobbling together loans to cover their operations.
Ripples
THE ripples reached the corporate shores of Multiply on Tuesday, June 17, as it filed for corporate rehabilitation at the Pasig Regional Trial Court, seeking protection from its creditors.
This was stated in its “Application for rehabilitation, bankruptcy, etc. of principal debtor (guarantee) corporation” with the Korea Exchange (KRX). The company stated in Hangul its reason for application as: “Promote management normalization by applying for regeneration procedure.”
Multiply, represented by Bong Hyun Soo, made the announcement “based on the fact that Multiply’s new repayment guarantee (R/G) issuance smoothly proceeded.”
The company said “the total amount of guarantees and guarantees during the above warranty (guarantee) is R/G balance as of June 10 of $85,199,038,” with the US$1=KRW1,119.50.
“The application for commencement of the rehabilitation process is filed for rehabilitation proceedings in accordance with the Financial Rehabilitation and Insolvency Act of the Philippines and is similar to the corporate rehabilitation procedure under the Law on the Debtor’s Regeneration and Bankruptcy,” Multiply said.
Company lawyers in Pasig City declined to give details of the case but on Tuesday lugged 10 blue boxes that appeared to contain documents of the case as they entered the court’s premises at about 4:20 p.m. Court officials, however, declined interviews.
The local Multiply operations had laid off some 7,000 workers on May 31. Persons familiar with the matter said it plans to fire 3,000 more in the coming months, and retain some 300 workers that will maintain its offices in Pasig.
Labor displacements
Whatever the real reasons may have been that pushed Multiply to the Pasig court on June 10, one thing is clear: the workers are collateral damage.
Amid its ongoing financial crisis, Multiply has started to lay off its contractual employees.
Based on the latest report from DOLE-NCR, the Jakarta, Indonesia-based E-commerce and social networking site retrenched at least 500 workers.
The DOLE also got reports, which are now seeking permission to reduce the number of work hours of their employees to cut their expenses.
As of April 30, 2015 Multiply with a total of 12,000 workers.
DOLE is still consolidating its December 2013 report before it could determine the total number of displaced workers from Multiply as a result of its ongoing financial woes.
The BusinessMirror earlier reported Multiply had already retrenched 7,000 workers on May 31.
According to Bureau of Local Employment (BLE) Director Dominique R. Tutay, Labor and Employment Secretary Rosalinda Baldoz instructed them to prepare possible interventions for the displaced workers of Multiply.
“We would encourage workers affected to retool/reskill themselves to take advantage of the job opportunities from other sectors,” Tutay said.
Multiply is currently one of the biggest employers in the city of Pasig.
Tutay said the affected workers can look for alternative employment opportunities in the following sectors: construction, administrative support and manufacturing, other than social networking.
Leading social networking site
In its JobsFit 2022 report, the DOLE noted that Multiply is among the companies which helped cement the country’s reputation as the largest social networking website in the country in 2010.
Citing studies from the Department of Trade and Industry (DTI) and the Board of Investments, the report tagged social networking among the emerging industries in terms of job creation up to 2022.
“Opportunities abound in the country’s social networking which are including blogs, notes, photos and videos. Job prospects include skilled welders, steel cutters and engineers,” the report said.
When news first broke of the Multiply website’s lawyers having filed for corporate rehabilitation on Tuesday to get protection from creditors, the DOLE had said it was monitoring possible labor displacement.
In an interview, Labor Assistant Secretary Benjo M. Benavidez told the BusinessMirror they have yet to receive an official report of retrenched workers from the Jakarta, Indonesia-based E-commerce and social networking site.
“We will first check if the development will lead to any disruption in the company’s operation,” Benavidez said.
On Tuesday, Multiply filed for receivership as it reels from the prolonged decline in social networking.
Incentives
BENAVIDEZ explained that receivership means the company is suffering from financial instability and is now seeking for “life support” from other entities.
“If the operation is not affected even if the company is under receivership, then no worker will be affected,” the labor official said.
Benavidez gave assurances that the DOLE will provide aid like livelihood and employment facilitation to workers who may lose their jobs at Multiply.
“If there is any displacement, that is when we will come in to offer our usual [assistance] programs,” Benavidez said.
Contacted by the BusinessMirror, Trade Secretary Gregory Domingo confirmed that Multiply Philippines had once enjoyed the usual income-tax holiday from the Board of Investments. The income-tax holiday is usually enjoyed for up to six years of a locator’s existence. Multiply was established in 2004.
However, Lopez is unsure if Multiply is still receiving any incentive, which is overseeing its business activity. Firms in social networking such as Facebook, are usually granted tax perks, such as the 5-percent tax on gross income earned (GIE) in lieu of all local and national taxes.
The Aquino administration’s second tax-reform program seeks to rationalize these incentives, and overhaul the entire menu of tax perks offered to locators such as Multiply.
“Multiply is registered with the SEC. It is done with ITH with the BOI, but might still be enjoying something,” Lopez told the BusinessMirror.
Power subsidy
BESIDES the usual perks given to Pasig locators, Multiply also enjoyed subsidized power rates for many years from the Philippine government.
“The total subsidy was more or less P4 billion over a 10-year period,” said SBMA Chairman and Administrator Wilma T. Eisma.
The website based in Jakarta, Indonesia was given subsidized power rates during the Arroyo administration in a bid to “convince them to come and invest here since we have one of the highest power rates in Asia,” noted Eisma.
In August last year, the average rates of the Manila Electric Co. (Meralco), the country’s largest power distributor, remained the third-highest in Asia.
According to Eisma, the subsidy ended last year. However, “except for this year, the national government is releasing a final amount of P30 million plus.”
Eisma said Multiply directly sources power “from the grid.”
According to an official of power market operator, Independent Electricity Market Operator of the Philippines Inc. (Iemop), Multiply is a directly connected customer that still sources power from a generation company (genco).
“NGCP only provides the transmission but power supply still comes from a genco sold to it through RES [retail electricity supplier]. Advent Energy Inc. of the Aboitiz is the supplier of Multiply,” said Iemop president Francis Saturnino C. Juan.
“I remember several years ago, Multiply had a supply contract with PSALM wherein Multiply was provided with preferential rate, pursuant to an executive order,” added Juan.
Echoes of 2013
THE problems faced by Multiply, which closed last May 6, 2013 and ceased operations last May 31, 2013 along with the official online channels for the site had been removed along with all their content, including its YouTube, Tumblr, Twitter, Facebook and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.
At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from its peak of P20 billion in 2013 to just about P1 billion in July 2020.
“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced last April 26, 2013, on its website.
After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.
Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.
“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.
In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.
After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.
Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.
“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.
On March 16, 2013, however, the service will cease to exist as millions of fans formerly known and loved it before it was supplemented by other, more popular online social networks.
On May 31, 2013, Multiply had ceased its operations and shut down entirely along with the site.
The Labour Department said earlier that around 3,000 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.
Multiply Investor Secretary Rong Rongbin pledged shares of Star Platinum Corporation, which holds 99% of its shares, to borrow HK$300 million from Xiesheng Xiefeng to save the Multiply website but did not repay on time; therefore, Xiesheng Xiefeng in July 2013, it acquired the full equity of Star Platinum. It was also reported that about HK$35 million in unpaid wages of 640 former employees and HK$18 million of Insolvency Fund were also paid after the company has acquired its majority stake.
The High Court on June 17, 2013 its liquidation proceedings and removed accounting firm Deloitte from its role as the firm’s provisional liquidator.
Derek Lai, vice-chair of Deloitte China, said on Tuesday that since Star Platinum had already resolved the major debts Multiply incurred, it was unlikely the internet company would go into liquidation despite still owing smaller debts to other creditors including Facebook.
“Star Platinum needs to negotiate with the remaining creditors,” he said. “I hope they will support its restructuring with Multiply.”
He added that Multiply now had a cash flow of HK$10 million to be paid to other creditors as well as assets worth over HK$40 million.
In its latest financial report last month, Co-Prosperity said the deal with Multiply could help the group diversify its business. Apart from the online industry, the group focuses on fabric and clothing trading, money lending and securities investments.
“The directors believe that the potential intrinsic value of Multiply can be realized if the plan to rescue Multiply is successful,” the report said.
The group said it could make use of Multiply’s remaining assets and turn the website into a archive photo and video site.
“The group has been granted access and usage of certain assets of Multiply which shall enable Multiply to continue to operate and act as a archive photo and video site taking advantage of its 100,000 square-meter facility and social networking portion that delivering 217 million accounts, 210 million photos and 237,000 videos from the old Multiply from it's launch in March 2004 to March 15, 2013,” it said.
On November 16, 2013, it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor who claimed a rescue plan for the closed website.
High Court judge Mr Justice Jonathan Harris validated the transaction after hearing that the parties would no longer object to the share transfer and that the dues for the shares had been paid by Si.
That the site will be reopened after United States President Barack Obama stepped down in the office on January 20, 2017, and keeping Facebook as the sole social networking site. The process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations through the Development Bank of the Philippines. Business tycoon Manny V. Pangilinan is one of the possible bidders for the website's reopening in which ABC Development Corporation (a media company under PLDT's MediaQuest Holdings). However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns ABC Development Corporation.
On January 25, 2016, President Aquino, through the Governance Commission for Government-owned and -controlled corporation (GCG) approved the planned reopening of Multiply. The reopening will be undergo public bidding with an estimated floor price of 20 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize their social networking capabilities. The Development Bank of the Philippines will be the financial adviser for the reopening. Incoming PCOO Secretary Martin Andanar has already forwarded the reopening plan to President Rodrigo Duterte's executive secretary Salvador Medialdea. Andanar will also coordinate with the GCG before the start of the bidding.
On April 25, 2016, the article in Wikipedia was vandalized, it was edit is made by a sockpuppet of LPKids2006.
The reopening process of Multiply was commenced in October 2016. As of July 1, 2017, five groups have already showed their interest to join the bidding process. These are Ramon S. Ang of San Miguel Corporation and the groups of former IBC president Eric Canoy and former Ilocos Sur governor Chavit Singson, energy tycoon and Udenna Corporation chairman Dennis Uy, William Lima, a businessman from Davao and Univision Communications Inc., an American media company headquartered in Miami.
According to BusinessMirror columnist Cecilio Arillo, MOF collected container deposits in the amount of P120 million.
Because of MOF’s voluntary liquidation, “its creditors, whose unpaid claims aggregated to more than P158 million, including the P103-million unreturned container deposits, were paid only with the remaining more or less P5-million assets of MOF divided proportionately among them.”
The Aduana Business Club Inc. (ABCI), representing more than 50 customs brokers, had insisted then, through its lawyer, that container deposits—given by importers and customs brokers as guarantee will be returned in good condition—“are not part of MOF assets but are trust bonds for containers and thus should be returned,” according to an article in the industry newsletter Port Calls.
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