Yes there is. Because the ultimate controlling party has few cash flow rights and so for this reason it could take advantage of the profit of Telecom for its own interest.
High risk of tunneling since the ultimate controlling party (Marco Tronchetti Provera) has a very little amount of cash flow rights in Telecom Italia so He has interest to move assets and profits to firms where owns an higher % of cash flow rights.
When we have a high separation between ownership and control for sure there is a risk of tunnelling. In this case also Marco Tronchetti Provera has low cash flow right in Telecom and high in GPI
I agree with my colleagues, the risk of tunneling is present of course, and it is represented by the fact that there is a high separation between ownership and control.
Sice there is a high separation between ownership and control, the risk of tunneling is real. Infact, Tronchetti Provera can extrapolate benefits in those companies in which he has less cash flow rights in order to tranfer money in those companies at the top of the pyramid.
The former position of MTProvera in the board of directors of telecom makes pretty difficult to take for sure a real separation between ownership and control. Risk of tunnelling remains, however, very high according to theory. We have all the elements to get worry about it when the percentages of votes owned by mr. MTP in the firms pictured above are sufficient to take the controlling party position. So, I'd say that even in this case.. it depends.
Of course there is the risk of tunneling. Being a pyramidal group in which resources can be easily transferred from a floor to another of the pyramid, it will be easy for the ultimate controlling party to extract private benefits through tunneling
I agree with you. As you said in this case there is a very high difference between control rights and cash flow rights. That means that the ultimate controlling party of all these companies (the same for all) has huge incentives in moving assets from the bottom line to the top of this pyramide, where he has much more cash flow rights, thus espropriating benefits of teh minor shareholders of the subcompanies!
I agree with you Camilla. When we have pyramidal group , the risk of tunneling is high,because it's easier to have separation between ownership and control. It is possible to have tunneling because the ultimate controlling party(Marco Tronchetti Provera) has a little amount of cash flow rights in Telecom Italia so he has interest to move assets and profits to firms where owns an higher percentage of cash flow rights.
In such kind of issues, where there pyramidical structure occurs and there is a big separation between ownership and control - the risk of tunneling always exists, because each shareholder can act according to his own interests.
Fully controlling Telecom Italia (100%) and cashing at the same 0.18% does pave the way for extracting private benefits. Simple, appoint in the BoD some friends and order them to pass some trnasactions.
There is a huge risk of tunneling because the ultimate controlling party has little %of cash flow rights in Telecom Italia. Thus he has interest to move benefits from it to other firms to gain more.
Tunnelling because the owner has low percentage of cash flow rights in Telecom, so he might move assets from telecom to other firms to increase his benefits.
I also see a high risk of tunnelling. A transfer of assets and profit out of the firms in order to benefit its controlling shareholders is likely in this situation.
The risk of tunneling is very high. In fact, Tronchetti Provera could move profits and resources from Telecom (where he has low cashflow rights) to another company on the top of the pyramid where he has more cashflow rights.
For sure! In fact, since Marco Tronchetti Provera family has a very little percentage of ownership rights (cash flow rights) in Telecom Italia there is a high separation between ownership and control and therefore the risk of tunneling is very high. Marco Tronchetti Provera family as a high interest in moving profits from Telecom Italia to companies at the top of the group where it can cash in higher dividends.
But, Giulia, even if theory helps us in saying that high risk is present, are we sure that this kind of practice (tunnelling) is really possible for MTP to put in action. Are the 18% of control rights in TI sufficient to have full control of the firm? Is TI controlled and directed or just controlled?
Telecom has always declared not to be directed by its parent company. For what concerns the full control, the real problem was that MTP was sitting in Telecom Board in the past years. Thus, even if the 18% was not sufficient to have a relvant influence in Telecom's decision making process, it was enough due to the fact that he was sitting in the board.
What about interests that are out from the mere profits? I am referring to the benefits that Tronchetti Provera has in indirectly controlling Telecom Italia like advertising facilities (through Telecom Italia Media) and IT ones (through Olivetti that is part of the Telecom Group). Can we consider them as secondary interests of MTP?
I agree with Camilla, the fact that he was in the board of telecom gave him a huge direction power on the firm. For waht it concerns control we have seen that 18% can be consedered really high, even if we should look at how the remaining 82% is spread.
What kind of transaction could be considered tunneling even if it does not involeved the companies in the group? I mean if I don't take into consideration movements of assets or profits from companies at the bottom of the chain towards company at the top of the chain?
well, I think that, in such scenario (picture) where few info about the varius groups and ownerships is provided, it is difficult to say it for sure. But we can make some hypotesis: in this scenario a lot of related party transaction could take place. Imagine also this sit: pirelli, for example, should have a lot of subs, now it's easy to imagine that Provera, in order to "tunnel" cash in his pocket may use this subs via Pirelli making a god part of the tunneling process outside the picture.
We cibsuder tunneling the espropriation of the benefits of a company for personal purpose, damaging other stakeholders, so for naming as "tunneling" a transaction we must have one of the companies of the group involved. An example of tunneling that involves also external parties can be imagined if Pirelli for example asks for consulting services to a company that is totally owned by MTP. In this case we would have the movements of assets from a company where MTP has 7.3% to a company where he can appropriate of the 100% of the same amount.
What about external Rpts between subsidiaries that are both controlled by State owned Holdings? For instance, Finmeccanica sells to Eni some machineries for oil treatment at a price that is overcharged compared to market?
Tunneling has to do with External related party transactions also. An example would be a company owned by the wife of the phisical person controlling a group. If this company hav transaction with a company in the group (for example the company in the group buys goods from the external related party) this is probably an expropriation of minority shareholders of the buyer.
We can consider as tunneling also those transactions involving external related parties. An example would be a transaction in which a company owned 100% by the wife of the ultimate controlling party provides goods or services to a company of the group.
Yes, we can have tunneling also with firms which do not belong to the group. In fact, related parties transaction are also those transaction with external parties which are linked to the major shareholder , for example in the case of a company owned by a relative of him/her.
Definitely!! we should always take into account the possibility to make transaction with companies that are external. In this case external firms are owned 100% by the wife of the ultimate controlling party it will be tunnelling as well.
Yes, it can be! Even though the link with the UCP must be evident. Tunneling can, potentially, benefit from an infinite set of connections, very hard to spot sometimes.
I definetly agree with Gian Marco. In an Economy like the Italian ones, made by infinite connections within few very important and powerful families/groups, the risk of tunneling is very high, and also very difficult to discover! That's why we need active shareholders in the firm, to control over the major shareholders and controlling parties of those firms!
Yes. I think this can be considered a case of tunneling. As long as the transaction has a price lower to the market or other situations that can favor only the major shareholder or in this case his wife
We can have tunneling in both external and internal related party transactions. I think In most case the external related party transactions are more risky than the other
YEs, We can suppose for instance transactions with an external firm owned by Tronchetti Provera's wife . In this case there could be also a case of tunneling.
marco tronchetti provera could act trying to achieve advantages making transactions from the bottom to the top because thanks to the pyramidal structure he has got the controll even if he has low percentage of voting rights, and a little amount of cash flows rights considering the bottom firms. So transferring assets could create personal gainings. By the way there is also the possibility to make transaction with external firms and the lower level firms of the pyramid. and if these external firms are owned by some family member of tronchetti provera it will be tunneling as well
Perfectly agree with you Cristina. Especially with reference to the possibility to make transaction with external if these external firms are owned by some family member of tronchetti provera it will be tunneling as well as you said. I would like to ad that these transactions are more dangerous than with internal firms. Do you guys think so? If yes why?
Yes. For example, instead of ordering a flow of resourses from the bottom to the top of the chain (where Marco Tronchetti Provera holds 58% of cash flow rights) Marco Tronchetti Provera could order to Telecom to transfer resouces towards a company wholly owned by one of his close family members (let's suppose his wife) . As a consequence they could cash in 100% of dividends rather than just 58%.
I think so Nardi.. in fact we know that transactions must be diclosed by law, but.. what if they are not clearly and easily linked and ascribable to the ucp? (or even illicitly hidden?) Off course, the more the link is faint, the more it's easy to "avoid" to mention them. That's one of the many reasons why corporate governance scholars and fiscal police exist for. Act openly and transparently seems to be pretty rare in the field.
It could seem a public company since Marco Tronchetti Provera Family controls 18% of the votes in Telecom ( and is its largest shareholder) although it holds only 0,7% of cash flow rights. However the ultimate controlling party of Telecom Italia is Tronchetti Provera Family through the Pyramidal structure and not the Telecom's management therefore it is not a pure public company.
Nowadays Telecom situation is: company managed by an investing vehicle (Telco s.p.a.) until the end of the shareholder agreement that built it (then Telefonica will become the major shareholder). Is it the landscape radically changed?
Looks like as if it were Public Company, but actually it is not. Where is the trick? Shareholder agreements can be adopted as a tool to communicate to the market untrue information: Pirelli does claim not to exert control to Olimpia, which in turn controls Telecom, in force of a shareholder agreement. But de facto Pirelli exert control over Olimpia and thus on Telecom.
I also agree with Giulia; Telecom Italia is not a public company because Tronchetti Provera controls the 18% of voting rights Telecom and the 0,7% of cash flow rights (18%*50,4%*25%*50,2%*58%) but through all the structure, not directly
I completely agree with Giulia. Even though Telecom could be seen as a public company because of its structure, we cannot refer to it as a pure public company.
It looks like a public company but it is not. In fact as the other said there is Tronchetti Provera that is the ultimate controlling party even if he owns 18% of Telecom.
Formally it is a Public Company, but the Pyramidal mechanism makes it atypical. In fact thanks to this instrument the separation between ownership and control is technically really high (taking into account the cash flow rights), as for the widely held companies, but substantially the control is in the hand of a unique controlling party (Tronchetti Provera's family, with the 58% of voting rights).
it seems to be a public company, but you can see through the pyramidal structure that the ultimate controlling party of Telecom is MTP who owns 18% of voting rights and 0.7 of cash flow rights.
If we considere merely the ownership structure yes, Telecom italia can be considere public. But there are many other features that deny the quality of public company. I agree with Alberto, many tricks are used to vehicle info to the market...
Hi Guys, silly question, could you explain me what does "+21% (Voting syndicate)" means exactly for Camfin and what are the effects that it generates in the subsidiaries ownership structures below? Thank you in advance
me too. I would know more about this 21.1% of voting syndicate. I would understand the meaning. Thank you! Sorry, You have just 24h to make this concept clearer for us :)
Guys,when we have a case like this,in which the separation between ownership and control is high,what kind of situation we can imagine? (Separation between direction and control? Independence in boards? ecc)
Actually, I do not know if the separation between ownership and control is high in Telecom since Marco Tronchetti Provera was sitting on its board before. However, in the opposite case, it would be preferring separating direction and control, in order to perfectly share responsibilities and avoid legal troubles in case of unfair behaviour.
Lorenzo is right. With the respect of this peculiar case we can say that degree of distance between ownership and control is not as high as one might expect. However in this kind of awkward situation the Italian legislation gives the way to adopt a perverse mechanism. Mr Tronchetti, although substantially exerting control over Telecom Italia, was able to declare to the market that Pirelli was unable to exert control over Olimpia by means of a shareholder agreement. The convenince associated with this choice is twofold: 1) exerting control on Telecom 2) bypassing the consolidation of Olimpia and Telecom.
Agree with Federica. Since Marco Tronchetti Provera was sitting in the board it is not easy to immediately indicate the separation between direction and control.
I agree with Lorenzo, in the opposite case, it would be preferring separating direction and control, in order to perfectly share responsibilities and avoid legal troubles in case of unfair behaviour
I agree with my collegues, cash flow rights are 50,4% x 18% = 9,072% of cash flow rights in telecom. Moreover Marco Tronchetti Provera family controls has 18% voting right in Telecom Italia, but here there is a problem in terms of who exercise the voting right as there is a shareholdin agreement between Pirelli and Olimpia wich state that Pirelli elect only 50% of the board of directors, that is the main instrument of control in a subsidiary company. If the shareholder agreement reflect the reality of facts the control the 18% voting right in telecom is controlled by a coalition between Marco Tronchetti Provera and other influent shareholders in Pirelli, if any.
A simple example of dual class sharing would be class A with the rule 1 share, 1 voting right and the other with no voting right. Let's suppose that the two classes have 50% each of the whole capital. Let's suppose that the ultimate controlling party has 50% of the class A shares. The ultimate controlling party has 50% of voting rights but only 25 % of the cash flow rights.
Is there any risk of tunneling?
ReplyDeleteOf course there is risk of tunneling, in that there is a high separation between ownership and control
DeleteLuigi, I agree with you!
DeleteI totally agree with you guys! we can say it since there is an high separation between ownership and control, given by the amount of Cash Flow rights.
DeleteYes there is. Because the ultimate controlling party has few cash flow rights and so for this reason it could take advantage of the profit of Telecom for its own interest.
DeleteAnytime there is an high separation between ownership and control, we can expect a risk of tunneling.
DeleteHigh risk of tunneling since the ultimate controlling party (Marco Tronchetti Provera) has a very little amount of cash flow rights in Telecom Italia so He has interest to move assets and profits to firms where owns an higher % of cash flow rights.
DeleteI suppose that the higher is the difference between voting and cash flow rights the higher is the risk of tunneling
DeleteThere is a high separation between ownership and control, so we have a high risk of tunnelling!
DeleteWhen we have a high separation between ownership and control for sure there is a risk of tunnelling. In this case also Marco Tronchetti Provera has low cash flow right in Telecom and high in GPI
DeleteThis comment has been removed by the author.
DeleteActually course of the high separation between ownership and control there will be an high risk of tunnelling
DeleteFor sure there is risk of tunneling, This because of the high separation between ownership and control.
DeleteThe risk of tunnelling is high, because of the high separation between ownership and control
DeleteIn this case we have risk of tunneling and it's also very high,since an elevated separation between ownership and control.
DeleteI agree with my colleagues, the risk of tunneling is present of course, and it is represented by the fact that there is a high separation between ownership and control.
DeleteI would like to add that this situation depends on the very low amount of owership rights that Marco Tronchetti Provera has in Telecom Italia.
DeleteOf course the risk of tunneling is too high due to the fact that there is a high separation between ownership and control.
DeleteSice there is a high separation between ownership and control, the risk of tunneling is real. Infact, Tronchetti Provera can extrapolate benefits in those companies in which he has less cash flow rights in order to tranfer money in those companies at the top of the pyramid.
DeleteThe former position of MTProvera in the board of directors of telecom makes pretty difficult to take for sure a real separation between ownership and control. Risk of tunnelling remains, however, very high according to theory. We have all the elements to get worry about it when the percentages of votes owned by mr. MTP in the firms pictured above are sufficient to take the controlling party position. So, I'd say that even in this case.. it depends.
DeleteI agree with Luigi, there is a risk of tunneling here because there is a high separation between ownership and control
DeleteYes, there is risk of tunnelling due to a high separation between ownership and control
DeleteI absolutely agree with giovanni when he said thatthe higher is the difference between voting and cash flow rights the higher is the risk of tunneling
DeleteI agree with all of you guys, the risk of tunnelling is high here, because it is high the separation between ownership and control.
DeleteIn this case, the risk of tunneling is high as in all Pyramidal groups.
DeleteOf course there is the risk of tunneling. Being a pyramidal group in which resources can be easily transferred from a floor to another of the pyramid, it will be easy for the ultimate controlling party to extract private benefits through tunneling
DeleteI agree with you. As you said in this case there is a very high difference between control rights and cash flow rights. That means that the ultimate controlling party of all these companies (the same for all) has huge incentives in moving assets from the bottom line to the top of this pyramide, where he has much more cash flow rights, thus espropriating benefits of teh minor shareholders of the subcompanies!
DeleteI agree with you Camilla. When we have pyramidal group , the risk of tunneling is high,because it's easier to have separation between ownership and control. It is possible to have tunneling because the ultimate controlling party(Marco Tronchetti Provera) has a little amount of cash flow rights in Telecom Italia so he has interest to move assets and profits to firms where owns an higher percentage of cash flow rights.
DeleteIn such kind of issues, where there pyramidical structure occurs and there is a big separation between ownership and control - the risk of tunneling always exists, because each shareholder can act according to his own interests.
DeleteFully controlling Telecom Italia (100%) and cashing at the same 0.18% does pave the way for extracting private benefits. Simple, appoint in the BoD some friends and order them to pass some trnasactions.
DeleteThere is a huge risk of tunneling because the ultimate controlling party has little %of cash flow rights in Telecom Italia. Thus he has interest to move benefits from it to other firms to gain more.
DeleteTunnelling because the owner has low percentage of cash flow rights in Telecom, so he might move assets from telecom to other firms to increase his benefits.
DeleteAt the pryamidal business group, There is a high risk here with a big separation.
DeleteI also see a high risk of tunnelling. A transfer of assets and profit out of the firms in order to benefit its controlling shareholders is likely in this situation.
DeleteThe risk of tunneling is very high. In fact, Tronchetti Provera could move profits and resources from Telecom (where he has low cashflow rights) to another company on the top of the pyramid where he has more cashflow rights.
DeleteYes because there is an high separation between ownership and control.
DeleteYes, because the ultimate controlling party has few cash flow rights
DeleteFor sure! In fact, since Marco Tronchetti Provera family has a very little percentage of ownership rights (cash flow rights) in Telecom Italia there is a high separation between ownership and control and therefore the risk of tunneling is very high. Marco Tronchetti Provera family as a high interest in moving profits from Telecom Italia to companies at the top of the group where it can cash in higher dividends.
ReplyDeleteBut, Giulia, even if theory helps us in saying that high risk is present, are we sure that this kind of practice (tunnelling) is really possible for MTP to put in action. Are the 18% of control rights in TI sufficient to have full control of the firm? Is TI controlled and directed or just controlled?
DeleteTelecom has always declared not to be directed by its parent company. For what concerns the full control, the real problem was that MTP was sitting in Telecom Board in the past years. Thus, even if the 18% was not sufficient to have a relvant influence in Telecom's decision making process, it was enough due to the fact that he was sitting in the board.
DeleteWhat about interests that are out from the mere profits? I am referring to the benefits that Tronchetti Provera has in indirectly controlling Telecom Italia like advertising facilities (through Telecom Italia Media) and IT ones (through Olivetti that is part of the Telecom Group).
DeleteCan we consider them as secondary interests of MTP?
I agree with Camilla, the fact that he was in the board of telecom gave him a huge direction power on the firm. For waht it concerns control we have seen that 18% can be consedered really high, even if we should look at how the remaining 82% is spread.
DeleteWhat kind of transaction could be considered tunneling even if it does not involeved the companies in the group? I mean if I don't take into consideration movements of assets or profits from companies at the bottom of the chain towards company at the top of the chain?
ReplyDeletewell, I think that, in such scenario (picture) where few info about the varius groups and ownerships is provided, it is difficult to say it for sure. But we can make some hypotesis: in this scenario a lot of related party transaction could take place. Imagine also this sit: pirelli, for example, should have a lot of subs, now it's easy to imagine that Provera, in order to "tunnel" cash in his pocket may use this subs via Pirelli making a god part of the tunneling process outside the picture.
DeleteWe cibsuder tunneling the espropriation of the benefits of a company for personal purpose, damaging other stakeholders, so for naming as "tunneling" a transaction we must have one of the companies of the group involved. An example of tunneling that involves also external parties can be imagined if Pirelli for example asks for consulting services to a company that is totally owned by MTP. In this case we would have the movements of assets from a company where MTP has 7.3% to a company where he can appropriate of the 100% of the same amount.
DeleteWhat about external Rpts between subsidiaries that are both controlled by State owned Holdings?
DeleteFor instance, Finmeccanica sells to Eni some machineries for oil treatment at a price that is overcharged compared to market?
Tunneling has to do with External related party transactions also. An example would be a company owned by the wife of the phisical person controlling a group. If this company hav transaction with a company in the group (for example the company in the group buys goods from the external related party) this is probably an expropriation of minority shareholders of the buyer.
DeleteI totally with Marco Ruggiero!
DeleteWe can consider as tunneling also those transactions involving external related parties. An example would be a transaction in which a company owned 100% by the wife of the ultimate controlling party provides goods or services to a company of the group.
ReplyDeleteThere could be a risk of tunnelling in a firm like Apple?
DeleteYes, we can have tunneling also with firms which do not belong to the group. In fact, related parties transaction are also those transaction with external parties which are linked to the major shareholder , for example in the case of a company owned by a relative of him/her.
DeleteDefinitely!! we should always take into account the possibility to make transaction with companies that are external. In this case external firms are owned 100% by the wife of the ultimate controlling party it will be tunnelling as well.
DeleteThere are 2 types of related transaction party: external and internal. As Marco has explained we could face with tunneling in both the cases.
DeleteYes, it can be! Even though the link with the UCP must be evident. Tunneling can, potentially, benefit from an infinite set of connections, very hard to spot sometimes.
DeleteI definetly agree with Gian Marco. In an Economy like the Italian ones, made by infinite connections within few very important and powerful families/groups, the risk of tunneling is very high, and also very difficult to discover! That's why we need active shareholders in the firm, to control over the major shareholders and controlling parties of those firms!
DeleteTunneling may take place in both cases. Either in external or in internal RPTs.
Deleteyes, absolutely. You can think about the trasfer of profits out of a firm for the benefit of its controlling shareholders in both situations,
DeleteYes. I think this can be considered a case of tunneling. As long as the transaction has a price lower to the market or other situations that can favor only the major shareholder or in this case his wife
DeleteWe can have tunneling in both external and internal related party transactions. I think In most case the external related party transactions are more risky than the other
DeleteTunneling can happen in both external and internal related parties.
DeleteYEs, We can suppose for instance transactions with an external firm owned by Tronchetti Provera's wife . In this case there could be also a case of tunneling.
ReplyDeletemarco tronchetti provera could act trying to achieve advantages making transactions from the bottom to the top because thanks to the pyramidal structure he has got the controll even if he has low percentage of voting rights, and a little amount of cash flows rights considering the bottom firms. So transferring assets could create personal gainings. By the way there is also the possibility to make transaction with external firms and the lower level firms of the pyramid. and if these external firms are owned by some family member of tronchetti provera it will be tunneling as well
ReplyDeletePerfectly agree with you Cristina. Especially with reference to the possibility to make transaction with external if these external firms are owned by some family member of tronchetti provera it will be tunneling as well as you said. I would like to ad that these transactions are more dangerous than with internal firms. Do you guys think so? If yes why?
DeleteYes. For example, instead of ordering a flow of resourses from the bottom to the top of the chain (where Marco Tronchetti Provera holds 58% of cash flow rights) Marco Tronchetti Provera could order to Telecom to transfer resouces towards a company wholly owned by one of his close family members (let's suppose his wife) . As a consequence they could cash in 100% of dividends rather than just 58%.
DeleteOf course Nardi. If we imagine transactions with external parties, they are definitely riskier than those with the bottom firms.
DeleteI think so Nardi.. in fact we know that transactions must be diclosed by law, but.. what if they are not clearly and easily linked and ascribable to the ucp? (or even illicitly hidden?) Off course, the more the link is faint, the more it's easy to "avoid" to mention them. That's one of the many reasons why corporate governance scholars and fiscal police exist for. Act openly and transparently seems to be pretty rare in the field.
DeleteIs Telecom Italia a public company?
ReplyDeleteIt could seem a public company since Marco Tronchetti Provera Family controls 18% of the votes in Telecom ( and is its largest shareholder) although it holds only 0,7% of cash flow rights. However the ultimate controlling party of Telecom Italia is Tronchetti Provera Family through the Pyramidal structure and not the Telecom's management therefore it is not a pure public company.
DeleteNowadays Telecom situation is: company managed by an investing vehicle (Telco s.p.a.) until the end of the shareholder agreement that built it (then Telefonica will become the major shareholder). Is it the landscape radically changed?
DeleteLooks like as if it were Public Company, but actually it is not. Where is the trick? Shareholder agreements can be adopted as a tool to communicate to the market untrue information: Pirelli does claim not to exert control to Olimpia, which in turn controls Telecom, in force of a shareholder agreement. But de facto Pirelli exert control over Olimpia and thus on Telecom.
DeleteAgree, I had the same your idea Giulia!
DeleteThanks Lorenzo for the detailed info! Well, it seems that Telecom is not a public (in sense of, state-owned) company since more then a decade..
DeleteI also agree with Giulia; Telecom Italia is not a public company because Tronchetti Provera controls the 18% of voting rights Telecom and the 0,7% of cash flow rights (18%*50,4%*25%*50,2%*58%) but through all the structure, not directly
DeleteI completely agree with Giulia. Even though Telecom could be seen as a public company because of its structure, we cannot refer to it as a pure public company.
DeleteIt looks like a public company but it is not. In fact as the other said there is Tronchetti Provera that is the ultimate controlling party even if he owns 18% of Telecom.
DeleteFormally it is a Public Company, but the Pyramidal mechanism makes it atypical.
DeleteIn fact thanks to this instrument the separation between ownership and control is technically really high (taking into account the cash flow rights), as for the widely held companies, but substantially the control is in the hand of a unique controlling party (Tronchetti Provera's family, with the 58% of voting rights).
it seems to be a public company, but you can see through the pyramidal structure that the ultimate controlling party of Telecom is MTP who owns 18% of voting rights and 0.7 of cash flow rights.
DeleteIf we considere merely the ownership structure yes, Telecom italia can be considere public. But there are many other features that deny the quality of public company. I agree with Alberto, many tricks are used to vehicle info to the market...
DeleteNo, according to me it is not a real public company also if Tronchetti family owns only 18,5% of shares.
DeleteI agree with Edoardo, Tronchetti family owns a significant part of the shares
DeleteThis comment has been removed by the author.
ReplyDeleteHi Guys, silly question, could you explain me what does "+21% (Voting syndicate)" means exactly for Camfin and what are the effects that it generates in the subsidiaries ownership structures below? Thank you in advance
ReplyDeleteme too. I would know more about this 21.1% of voting syndicate. I would understand the meaning. Thank you! Sorry, You have just 24h to make this concept clearer for us :)
DeleteGuys,when we have a case like this,in which the separation between ownership and control is high,what kind of situation we can imagine? (Separation between direction and control? Independence in boards? ecc)
ReplyDeleteActually, I do not know if the separation between ownership and control is high in Telecom since Marco Tronchetti Provera was sitting on its board before. However, in the opposite case, it would be preferring separating direction and control, in order to perfectly share responsibilities and avoid legal troubles in case of unfair behaviour.
DeleteLorenzo is right. With the respect of this peculiar case we can say that degree of distance between ownership and control is not as high as one might expect. However in this kind of awkward situation the Italian legislation gives the way to adopt a perverse mechanism. Mr Tronchetti, although substantially exerting control over Telecom Italia, was able to declare to the market that Pirelli was unable to exert control over Olimpia by means of a shareholder agreement. The convenince associated with this choice is twofold: 1) exerting control on Telecom 2) bypassing the consolidation of Olimpia and Telecom.
DeleteWhat do you wanna mean when you say perverse mechanism?thanks
DeleteI mean that you can lawfully and respectfully do an Italian job.
DeleteI would say separation between direction and control. But we don't know exactly because MTP was setting in the board and this complicates the matter.
DeleteAgree with Federica. Since Marco Tronchetti Provera was sitting in the board it is not easy to immediately indicate the separation between direction and control.
DeleteI agree with Lorenzo, in the opposite case, it would be preferring separating direction and control, in order to perfectly share responsibilities and avoid legal troubles in case of unfair behaviour
DeleteHow many cash flow rights does Pirelli have in Telecom??
ReplyDeleteInteresting question Saverio! Pirelli has 2.268% cash flow rights in Telecom!
DeleteIn my opinion, Pirelli owns 9.07% cash flow right of Telecom Italia (50.4% * 18%)
DeleteAgree, 50.4% * 18%
DeleteAlso in my view Pirelli has 9.072 cash flow rights in Telecom ( 50.4 % * 18%)
Delete50.4% * 18% = 9.07%
DeleteIn my opinion, the cash flow rights does Pirelli have in Telecom is 9,07% (=50.4% * 18%)
DeleteIt is just given by the product between 50.4% and 18%, so you get 9.07% cash flow rights of Pirelli in Telecom Italia.
DeleteI agree with my colleagues, Pirelli's cash flow rights on Telecom 9,072%, as a result of the computation --> 50,4% x 18%
DeleteI agree with you guys, Pirelli owns 9,072% (50,4% x 18%) cash flow rights in Telecom.
DeleteI definitely agree with you guys. Pirelli owns 50,4% x 18% = 9,072% of cashflow rights in Telecom
DeleteI agree with my collegues, cash flow rights are 50,4% x 18% = 9,072% of cash flow rights in telecom. Moreover Marco Tronchetti Provera family controls has 18% voting right in Telecom Italia, but here there is a problem in terms of who exercise the voting right as there is a shareholdin agreement between Pirelli and Olimpia wich state that Pirelli elect only 50% of the board of directors, that is the main instrument of control in a subsidiary company. If the shareholder agreement reflect the reality of facts the control the 18% voting right in telecom is controlled by a coalition between Marco Tronchetti Provera and other influent shareholders in Pirelli, if any.
DeleteI believe that Anh Thơ Bùi has provide the right answer: 9.07%
DeleteHi guys, could you tell me how many cash flow rights does Camfin have in Telecom Italia? thanks.
ReplyDeleteI think that Camfin ows 2.268 cash flow rights in Telecom Italia (25%*50.4%*18%)
DeleteAgree with Federica, 25%*50.4%*18%
DeleteIn my opinion, the cash flow rights of Camfin have in Telecom Italia is 2,268% (=25%*50.4%*18%)
DeleteThanks. I think your computations are right.
DeleteHi guys, in this case How many cash flow rights and voting right does GPI have in Telecom Italia?
ReplyDeleteGPI owns 1,14% of cash flow rights in Telecom Italia. (50,2% x 25% x 50,4% x 18%)
DeleteYep, i agree with Claudia. 1.14% is the right answer
Deleteguys what about the others two ways to separate ownership and control? dual class sharing and cross-ownership how will you explain them in few words?
ReplyDeleteA simple example of dual class sharing would be class A with the rule 1 share, 1 voting right and the other with no voting right. Let's suppose that the two classes have 50% each of the whole capital. Let's suppose that the ultimate controlling party has 50% of the class A shares. The ultimate controlling party has 50% of voting rights but only 25 % of the cash flow rights.
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