DITO issues 35 million shares to 'unrelated third party entity' to prevent public float violation

The PSE asked DITO CME [DITO 8.70 3.69%] to provide more information on the amended disclosure that DITO submitted earlier in the week that said the company had issued 35 million common shares to an “unrelated third party entity”, which, according to DITO, “public ownership of Dito CME at 20.02% as of 27 August 2021”. DITO’s clarification said that the selling price for the shares was P8.00/share, for a total consideration of P280 million, and that the shares were sold to a company registered in the British Virgin Islands called “Loden Infra Technologies Ltd” (LODEN).

DITO said that there are no common directors between the two companies and none of LODEN’s directors are related to DITO’s directors. To justify the sale, DITO said that it was complying with the PSE’s rule on Backdoor Listings, which is that way company going through a backdoor listing “needs to comply with a minimum 20% public ownership of its shares from the actual issuance of shares which triggered the application of the Backdoor Listing Rules”. It followed that by saying that it could use the money to help build out its network.

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The PSE asked for the “identity and/corporate background” of LODEN, and the best that DITO could say was that they were registered in BVI and that none of its directors are also DITO’s directors, and that none of its directors are family of DITO’s directors. I suppose it helps identify the people behind LODEN to tell us about the 50 people in the world that they’re not (DITO directors and family), but that’s still a pretty “sus” dodge of the question if you ask me. Whoever it is just made a quick P20 million thanks to the 8% discount they got on the purchase of the shares while DITO’s market price was hovering around P8.70/share. The math of how this gets DITO up above 20% public ownership is a little weird to me, though. Before the stock-swap and ACS raise, DITO had 2.8 billion issued/outstanding shares, with 67.52% of those shares (according to the PSE’s website) making up the public float. 67.52% of 2.8 billion is 1.89056 billion.

Add the 35 million shares that are sold to LODEN, and now the float is at 1.92556 billion shares (68.77% of pre-swap issued and outstanding). Once the swap happens and Udenna is issued the 11.2 billion new shares, it will own 79.8% of DITO, and the public will own 1.92556 billion shares of 14.035 billion, which is 13.72%. Even if the language was parsed to mean that the 20% public float requirement only applies to the 11.2 billion new shares issued to Udenna, 20% of 11.2 billion is 2.24 billion and the LODEN-boosted public shares still only amount to 1.93 billion. I’ve never dealt with this kind of situation before, so if anyone can help explain this one to me I’d really appreciate it.

I’m assuming it has something to do with my calculation of the initial number of shares in the public float, but my understanding is that DITO can’t count all 2.8 billion shares as the “public float” because a good portion of those shares is owned by Dennis Uy’s holdco, Dennison Holdings, and that precludes the shares (from my understanding) of being counted towards the public float number. Anyone with insight into this?

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