By Justine Irish D. Tabile, Reporter
THE SALE by DITO CME Holdings Corp. of 2.2 billion shares to “unrelated third-party” investors bring funds to the Dennis A. Uy-led telecommunications company but raises concerns about its financial health, analysts said.
“The share issuances will provide DITO with fresh funds to support the network rollout of its flagship subsidiary, DITO Telecommunity Corp.,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.
However, Mr. Colet said the fresh funds would hardly improve the company’s equity deficit, which exceeded P21 billion in the previous quarter, increasing the likelihood of more capital-raising activities.
Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said the issuance is a sign of a “significant development” for the company.
“By selling 10% of its shares, DITO is effectively diluting the ownership of its existing shareholders by 10%. This means that each existing shareholder will own a smaller percentage of the company,” Mr. Arce said.
In separate disclosures on Aug. 16 and 17, DITO reported that it had entered into subscription agreements with unrelated third-party subscribers for 1.59 billion and 610 million common shares, respectively, at par value.
However, since the sale was at a very steep discount compared with its price of as high as P2.40 per share last week after the disclosures, analysts said the move could raise concerns about the company’s financial health.
“Investors may question why the company is selling shares at a discount, and whether this is a sign that the company is in financial trouble,” said Mr. Arce.
“If management thinks a peso per share is a fair price for an arm’s length transaction, then this implies that the market is significantly overvaluing the company,” Mr. Colet said.
He added that the recent transactions are in contrast to the private share placement to Loden Infra Technologies Ltd. on Aug. 2021 for P8 per share.
“Although that was a smaller deal, some public investors may worry that the deep discount given to the latest share issuances reflects a fundamental change in the company’s prospects,” he said.
Last Thursday, DITO disclosed that it had completed the applicable requirements for the listing of 35 million shares for a total price consideration of P280 million from Loden Infra. It added that the number of DITO’s listed common shares will be adjusted on the listing date or Aug. 22, 2023.
However, Mr. Arce said that the share placement of Loden Infra implies that the company believes in the long-term prospects of DITO.
With the sale of 2.2 billion shares, analysts expect DITO’s public float to increase as they are said to have been sold to unrelated parties.
“The placements to what the company has described as unrelated third parties will increase the public float, assuming they do not own at least 10% of the outstanding shares and are nonstrategic investors in DITO,” said Mr. Colet.
Mr. Arce said that issues could also be raised from the entry of a new shareholder as its management may have a different vision for the company.
“This could lead to changes in the company’s management team, as well as its strategic direction,” he said.
The company did not disclose the third parties to which the 2.2 billion total shares were issued even if the first sale, which constituted 1.59 billion shares, represented 10.18% of the total number of issued and outstanding shares of DITO after the issuance, which was 15.63 billion.
“A holder of at least 5% of a company’s outstanding shares is required to disclose such ownership,” said Mr. Colet.
“Thus, at the very least, we should expect a disclosure of the subscriber to the 1.59 billion shares,” he added.
At the stock exchange on Friday, shares in DITO declined by five centavos or 2.08% to P2.35 apiece.
