By Arjay L. Balinbin, Senior Reporter
DITO CME Holdings Corp.’s decision to defer its P8-billion stock rights offering (SRO) may have been due to the current tepid market conditions, analysts said.
The Philippine Stock Exchange (PSE) said in a notice on Saturday that DITO CME’s “management has determined that current market conditions are less than ideal to pursue the offering.”
DITO CME said it will refund “any and all subscription payments made by any existing shareholder or qualified institutional buyer during the offer period of the stock rights offer.”
To recall, the company announced on Jan. 18 that it received regulatory approval to extend its SRO through Jan. 25, allowing more qualified investors to obtain additional shares at an “attractive discount.”
It said the extension was granted “due to numerous requests from shareholders who were unable to subscribe to the offering nor receive their SRO kits on time due to logistical difficulties brought about by the surge of COVID-19 (coronavirus disease 2019).”
DITO CME offered a total of 1.64 billion common shares, priced at P4.88 per share. The offer price was an 18.4% discount from the closing price as of Jan. 13.
DITO CME President Eric R. Alberto said that the proceeds would be used to “fund our telco services all over the country in fulfillment of the technical audit requirements, and to fulfill our own mission to be a compelling and a competitive alternative telco in service of the Filipino public.”
Asked if this could be a sign of lack of confidence in the company, Astro C. del Castillo, managing director of First Grade Finance, Inc. replied: “Definitely, that’s it.”
“But to put it more politely, it should do more to attract more investors by reaching out to the investing public and fund managers,” he said in a phone interview on Sunday.
DITO CME shares closed 1.17% lower at P5.08 apiece on Friday last week. The company owns 54% of DITO Telecommunity Corp.
“I think there was a lack of more relevant information from the company about prospects moving forward, but I understand because it’s just a startup,” Mr. Del Castillo said.
But Anna Corenne M. Agravio, equity analyst at Regina Capital Development Corp., said in a separate phone message: “I don’t think it automatically translates to a lack of confidence in DITO.”
“I’d say it’s more of a reflection of current market sentiment in general. Perhaps DITO weighed the costs of conducting an SRO amid the pandemic and generally muted overall sentiment versus the proceeds it will be able to raise to fund its expansions, and then decided that it would ultimately be a better idea to defer the offering,” she added.
She noted that trading had been relatively anemic in recent weeks.
“Based on the index, it looks like investors are staying cash-heavy for now, which could also translate to a rotation from the more volatile second and third liners (like DITO) to index names in the meantime.”
BusinessWorld tried to reach out to DITO CME to get its side.
Moreover, the PSE said its announcement on Saturday should not be construed as an approval of DITO CME’s deferment of the offering.
“This is without prejudice to any regulatory action that [the] Exchange may pursue in order to ensure full compliance with the applicable rules and for the protection of the investing public consistent with the mandate of the Exchange, as a self-regulatory organization, to maintain a fair and orderly market,” it added.
DITO CME’s action, according to Diversified Securities, Inc. Equity Trader Aniceto K. Pangan, may have a negative impact on future offerings.
“If PSE approve[d] on this after the offer has been made, then the credibility of [the] PSE to conduct an offering will be stained or questioned,” he said.
“Already a number of investors have sold their DITO shares after the ex-date when the stock offer price has been set. They’ll use this as payment for their stock right shares’ entitlement if canceled then instead of gain from stock rights offer, investors will bear the losses thus investor interest will negatively be affected,” he added.
COL Financial Group, Inc. First Vice-President April Lynn C. Lee-Tan disagreed that DITO’s action will affect investor interest in future offerings.
“No, it shouldn’t. While it is true that market conditions are difficult, the numerous IPOs (initial public offerings) and follow-on offerings the past two years imply that as long as a company has good business and is selling shares at a reasonable valuation, there will be demand,” she said in a phone message.
Prior to its announcement on Saturday, the PSE said on Jan. 27 that it penalized the company for “failure to comply with the requirements under the rules.”
DITO CME handles Udenna Corp.’s investments in media, communications, entertainment, and information technology.
It has three digital companies: Unalytics, which provides managed analytics services; Acuity Global, which curates media properties across platforms and provides media planning and buying; and Luna Academy, an online education platform aimed at equipping users with future-ready skills, credentials, and certificates. — with inputs from Keren Concepcion G. Valmonte