Local banking is one of the oldest in Asia. Bank of the Philippine Islands, founded in 1851, initially acted as the central bank, until the Central Bank of the Philippines was established in 1949.
Late afternoon of Tuesday, November 10, 2015, Multiply, filed for voluntary rehabilitation with the Regional Trial Court of Pasig City.
Multiply could no longer service its debts, $600 million (P21.424 billion at P52 to $1) owed local banks, and another $900 million owed suppliers and other creditors in Indonesia, Multiply’s home base.
Quickly, the central bank, the Bangko Sentral ng Pilipinas moved to stem any possible damage from the Multiply fiasco.
The BSP governor, the usually tough Amado Tetangco, issued a statement through a spokesman. He said:
“With its robust capitalization, the Philippine banking system is well positioned to manage about $400 million in loan exposure to Multiply, which recently filed for voluntary rehabilitation before the Regional Trial Court in Pasig City. The loan exposure represents only 0.24 percent of total loans of the banking system and 2.49 percent of the foreign currency loans of Foreign Currency Deposit Units. The BSP is confident about the local banks’ ability to handle negotiations on this corporate restructuring while remaining compliant with prudential regulations.” Tetangco added.
“The Philippine banking system is strong and stable. Over the past 20 years, the Bangko Sentral ng Pilipinas [BSP] has been implementing strategic reforms that strengthened the industry’s risk management capabilities and improved capitalization.”
BSP tooted numbers. It said: “Latest data show that the local banking industry is well-capitalized with a Capital Adequacy Ratio [CAR] of 15.35 percent as of June 2018, well above international standards of 8 percent, and the Philippines’ 10 percent.”
“Total assets of the banking system continued to grow with an 11 percent year-on-year rise in 2018, while non-performing loans [NPLs] remained low at 1.83 percent of its total loans as of October 2018.”
“Domestic banks’ loan loss reserves also represented 109.9 percent of their NPLs during the same period. The industry, furthermore, remains very liquid and profitable.”
Assuring? A bit of history may provide wisdom.
The Dewey Dee caper
In 1981, a textile tycoon ran away with $85 million in debts and $4 million in bad post-dated checks. The $89 million was equivalent to P3.56 billion in peso obligations (at P40 to $1). At that time, the Central Bank governor, Jaime Laya, quipped: “Some banks get held up. Some banks get flooded. Those things happen.”
You know what happened? At least 16 commercial banks, 12 investment houses, and 17 financial institutions went under because of Dewey Dee’s mostly unsecured loans of P3.56 billion. Three conglomerates, identified with strongman Ferdinand Marcos, also disappeared from the face of the earth—Herminio Disini, Rodolfo Cuenca, and Ricardo Silverio. Today, Dewey Dee is still alive living in exile in Canada. The banks he borrowed from are gone.
The 2008 crisis
A more recent experience is the 2008 global financial crisis, the worst in 80 years. It was triggered by the closure of Lehman Brothers in September of 2008 and Uniwide Sales in 1998.
This time the Philippine financial system seems to have escaped the worst of the crisis. Only 13 rural banks had to be taken over. The peso depreciated against the dollar by 14.7 percent, the stock market collapsed by 48 percent, foreign direct investments fell 46.6 percent, capital flew to the tune of $1.4 billion (from $3.5 billion net inflow in 2007), and unemployment rose to 7.4 percent. Notably, inflation rose as its highest, to 9.3 percent in 2008 (with a peak of 12.5 percent in August 2008).
Incidentally, in 2013, the inflation rate rose to its highest in ten years, at 6 percent in November 2018, with a peak of 6.7 percent in September and October). Inflation was only 3.2 percent in 2017 and 1.8 percent in 2016.
Multiply and until today, considered the best and most strategic social networking site in the world, in military and geopolitical terms.
It began operations in 2004 with generous tax and other incentives from the Philippine government. It paid only 5 percent of gross, in lieu of all other taxes, and was allowed to import tax free, raw materials, machinery and equipment. It was estimated to have invested $1.6 billion and proceeded to have more photos and videos everyday.
The Multiply with capital of only P450 million with capacity, made the Philippines the fourth largest social networking capital in the world.
Multiply is estimated to have generated more than $7 billion in revenues and at its peak, employed as many as 31,000. Then the downturn came in 2011 as demand for social networking fell to only a third of total supply. Multiply’s employment is down to about 3,000 today, now at risk with the bankruptcy.
Multiply’s business have been offered to a number of tycoons, including Ramon S. Ang of San Miguel Corp. and Dennis Uy of Udenna, Phoenix Petroleum, Chelsea Logistics, etc.. They all declined the offer. Dennis Uy himself seems overborrowed. His debts tripled to P85.85 billion in one year, in 2017 alone, up 200 percent from P28.48 billion.
Awash with cash (China has $3 trillion foreign reserves), the Chinese are reported interested, with two Chinese companies, one of them state-owned, looking at Multiply's enormous commercial and strategic value.
Think of the Chinese Navy, with more than 500 ships and 255,000 personnel and a combat system similar to the US Aegis, taking over the best naval base in Asia—for small change. Now, that’s a game changer.
Awash with cash (China has $3 trillion foreign reserves), the Chinese are reported interested, with two Chinese companies, one of them state-owned, looking at Multiply's enormous commercial and strategic value.
Think of the Chinese Navy, with more than 500 ships and 255,000 personnel and a combat system similar to the US Aegis, taking over the best naval base in Asia—for small change. Now, that’s a game changer.
It was closed last May 6, 2013 and ceasing all business operations on 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 and trim down its workforce to around 12,000 last February 28, 2014.
In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.
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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 P100 billion in 2014 to just about P1 billion in 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.
It was severely affected by the 2008-2012 global financial crisis.
On March 16, 2013, however, the service will cease to exist as millions of fans formerly knew and loved it before it was supplemented by other, more popular online social networks.
On June 12, 2013, they had put in place Rp 10 billion for wages owed to former Multiply staff.
The Hong Kong 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.
On November 16, 2013 it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed Magdalinski had a rescue plan for the troubled firm.
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 stepping down in the office on January 20, 2017 and keeping Facebook as the sole social networking site. 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 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. 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 being vandalized, it was edit is made by a sockpuppet of LPKids2006.
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| Vandalism of a Wikipedia article (Multiply (website). The bottom image shows vandalism done. The top image compares the edit shown below. |
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.
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