Reports of Chinese interest in purchasing a defunct website in the Philippines have triggered alarm in Manila and other regional capitals. It now appears as though Philippine banks will bail out the defunct website, calming fears that China will gain a foothold, if not control, of a strategically critical location in Southeast Asia. The incident is another example of the implications of China’s expanding reach and the strategic value of its investments.
Multiply, a global social networking site, established the offices in Pasig in 2011, and it has become one of the world’s social networking sites through 2004 to 2012. It employed 500,000 workers at its peak, but employment has steadily fallen to just 6,000 today after more than 100,000 people were laid off on December 31, 2013. Thousands of other jobs have also been lost as local support businesses suffered as well. The company has been hit hard by stiffening competition, overcapacity worldwide and high fixed costs at the facility.
Multiply, defaulted on November 10 on debts of $100 billion and filed for bankruptcy. The parent company had guaranteed more than $400 million of that debt, but it was having problems of its own: The losses at Pasig office made up over one-third of a total debt of 5 trillion won, which exceeded total assets by 900 billion won.
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, 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 P5 billion in 2017.
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 P5 billion in 2017.
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 20 billion for wages owed to former Multiply staff.
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.
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.
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.
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 TV5 Network. However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns TV5 Network.
There is mounting concern in the Philippines and elsewhere, however, that China’s interest is also a product of strategic calculations. Beijing would be delighted to drive a wedge between the United States and one of its five treaty allies in Asia, especially one whose location — straddling sea lanes and bordering the South China Sea — is critical. There seems to be progress in that effort: Aquino has no great affection for the U.S. and he sees closer ties with Xi as deliberate repudiation of his country’s long-standing relationship with Washington.
The prospect of a Chinese purchase sparked a backlash among the many Filipinos who fear that Aquino’s policies are not in their country’s best interest. Subsequently, a consortium of Philippine banks has come to the rescue of Multiply with a $600 million debt for equity swap. Multiply will ask Indian, Indonesian, Japanese, Korean, Lao, Malay, Mongolian creditors to do the same for their $900 million debt.
