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Stock Commentary

DFNN announces plans for stock rights offering

Merkado Barkada
DFNN announces plans for stock rights offering

Gaming software and tech company DFNN [DFNN 2.87 6.30%] announced that its board approved a plan to conduct a stock rights offering( SRO) to sell 162,310,004 primary (new) common shares. The disclosure listed the price as “Par Value of PhP1,00”, so it’s not yet clear if the company intends to offer the SRO shares at such a massive discount to its current P2.87/share price, or if the company just inserted the stock’s par value as its price as a placeholder. We’ll have to wait and see on that.

The disclosure was very clear, however, about the 1:2 entitlement ratio, which means that DFNN stockholders will be able to purchase 1 SRO share for every 2 DFNN shares already owned. DFNN said that it’s raising the money to “take advantage of the opportunities present in the market”, and that it would use the proceeds to further expand into interconnecting and adopting interactive technologies”. DFNN ‘s board is using an increase in its authorized capital stock, approved back in 2017 but left unused until now, to raise DFNN’s capital stock from the ~P324 million it has now up to P1 billion.

MB BOTTOM-LINE

SROs are usually issued at a discount to provide a little sweetener for the rights holders (just a happy accident that the company’s majority holders get to avail of it, too, right?), but it feels like a P1.00/sh price might be too good to be true. Setting the price aside for a second, it’s hard to argue with DFNN’s line of reasoning here; the pandemic has forced gaming online at a rate that would have been unthinkable just two years ago, and DFNN’s business of providing gaming software solutions to online gaming operators seems almost comically-perfect for the moment we find ourselves in. Maybe DFNN saw all the news on omicron, and was like: why not us, and why not now? 

 

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DFNN INC. PHILIPPINE STOCK EXCHANGE STOCK RIGHTS OFFERING
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