DITO bares plans for a stock rights offering

In a disclosure just before the market open, DITO CME [DITO 8.60 4.02%] revealed that its board has approved a plan to conduct a stock rights offering (SRO). The date of the offering, the price, the entitlement ratio, or any of the other crucial particulars were not made public.

DITO said that these will all be set by management at a later time. The plan to conduct the SRO relies first on the SEC’s approval of DITO’s plan to raise its authorized capital stock, which it must do anyway in order to prevent DITO shares from being suspended for insufficient public float once the share-swap deal with Udenna Corp goes through on the infusion of Dennis Uy’s Dito Telecommunity assets.

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Despite saying nearly nothing, this somehow feels like a more communicative disclosure than we would usually get out of a Dennis Uy-owned company. So, why is this happening? Well, right now, DITO’s public float is about 67%, with Dennison Holdings (another Dennis Uy-owned private holding company) owning most of the rest (31%).

After the share-swap deal goes through, Udenna will own 80% of DITO’s stock, Dennison’s stake will reduce to 6.2%, and the public float will reduce to around 13.5%. Since DITO needs to maintain at least a 20% public float at all times, it will need to sell more shares to the public to maintain the tradability of its shares once the share-swap with Udenna is completed. If DITO did nothing after the swap, the PSE would be forced to suspend DITO’s stock until it could somehow increase its public float.

Quick back-of-the-envelope math says that DITO will need to sell at least around 1.2 billion common shares in the SRO to scrape up above the 20% public float floor. As with anything DITO-related, we’ll just have to wait and see what happens.

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