Yesterday we talked about how DITO CME [DITO 2.73 1.1%; 47% avgVol] reported a FY22 net loss of P25.6 billion, and we discussed all of the performance metrics of DITO’s main subsidiary, Dito Telecommunity (Dito Tel).
Today I want to draw attention to the note provided by DITO’s auditor, P&A Grant Thornton (GT), in which GT says that, in its opinion, there exists “material uncertainty that may cast significant doubt on the ability of [DITO] to continue as a going concern” [link; page 6 of Annex B], due mostly to DITO’s P27.9 billion capital deficiency as of December 31, 2023, and the simple math that DITO’s liabilities exceed its assets by a whopping P196.6 billion.
GT noted that DITO’s management team has responded to these concerns by “continuing to heighten its commercial operations” by trying to get more subscribers to give it more revenue, implementing cost-saving measures, securing commitments from creditors to acquire more debt, negotiating payment extensions with infrastructure build-out vendors, and exploring other fundraising activities like a follow-on offer to satisfy Dito Tel’s funding requirements.
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The accountants are shouting from the rooftops, and DITO’s response appears to be a panicked blend of, well, anything it can think of to try and make ends meet.
In accounting, a company is a “going concern” when it can be reasonably assumed that it will be expected to continue operating for at least the next year, where “going concern” means “solvent”, and “material uncertainty” means “significant enough uncertainty to require disclosure to the investing public”.
Put plainly, GT thinks that it is not certain that DITO will avoid going bankrupt in 2023.
GT said it evaluated the representations and assumptions that DITO’s management made as part of its plan to avoid bankruptcy, and GT thinks that DITO will be able to avoid bankruptcy based on that plan. But there still remains uncertainty about DITO’s ability to avoid some form of near-term existential failure.
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