According to SEC, Rappler "intentionally created an elaborate scheme" to justify the receipt of over a $1 million from a foreign investor, Omidyar Network (ON). ON is an investment company owned by eBay auction site founder Pierre Omidyar.
In recounting the facts of the case, SEC said in 2013 and 2014, Rappler, Inc. received over $1 million from foreign investors. This was supposedly in exchange for a grant of control and financial returns.
The SEC also said the company formed Rappler Holdings Corporation "for the sole purpose of issuing [Philippine Depositary Receipts]."
The SEC decision declared void a PDR of one of Rappler's foreign investors, Omidyar Network, and questioned the corporate deal.
A PDR is a financial instrument that foreign entities can buy into for financial returns in a local company but not in the form of dividends which are tied to ownership.
"Because Omidyar was the later purchaser... it caused the insertion of certain provisions that assure control over other PDR holders, and also over the corporate policies of Rappler, Inc. and its alter ego Rappler Holdings Corporation," the decision read.
The SEC said while the PDR was not a stock that indicates ownership, it gives holders "certain rights derived from equity and reserved to Filipinos."
However, Rappler said PDRs do not give ownership rights, and other large companies have a similar set-up. It also clarified the investment does not affect editorial operations.
Ressa likened PDRs to betting on a horse, with no assurance of control over how the horse is run or of financial returns.
"This means our foreign investors, Omidyar Network and North Base Media, do not own Rappler. They invest, but they don't own. Rappler remains 100 percent Filipino-owned," Rappler said.