I wrote a while ago on the DITO CME [DITO 5.90 5.30 percent] SRO, and how the disclosure “raised more issues than it answers.” Among their concerns was Udenna’s (at the time) apparent absence from the SRO itself.
I expressed other concerns, such as the ex-date coinciding with the price date and the extremely limited level of disclosure provided on DITO’s usage of the profits, but the Udenna situation looked particularly strange.
That’s why I was relieved when Leo Venezuela, Udenna’s Investor Relations Head, phoned me to inform me that Udenna’s absence was due to a little snafu in the PSE’s guidelines. Normally, after a backdoor listing (such as the one resulting from the share swap with Udenna), the PSE requires the listed firm to perform a follow-on offer before engaging in any capital-raising activities.
A stock-rights offering (SRO) is not often permitted, except in circumstances where the majority shareholder sits out the first few rounds of the SRO, as Mr. Venezuela described. That’s exactly what’s going on here.
DITO is carrying out its post-backdoor FOO, but instead of a FOO, it is carrying out an Udenna-less SRO. As Mr. Venezuela also mentioned (and a few MB readers pointed out), AC Energy [ACEN 10.88 1.30 percent] did something similar approximately a year ago.
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I was aware of the FOO regulation, but I had not realized that Udenna’s absence from the SRO was essential for DITO to conduct the SRO at all.
This is just another option for a listed firm to comply with the PSE’s obligation to undertake some type of offering prior to raising further equity after a backdoor listing. Mr. Valenzuela did, however, point out that Udenna would be able to participate by subscribing to any rights shares that were not purchased in the first few rounds.
As much as I enjoy expanding my grasp of a problem, I especially enjoy refining it by discovering a new twist to an old rule!
Thank you again, Mr. Venezuela, for providing the context; I’m delighted to add that tidbit of SRO information to my collection and then pass it on to the Barkadans!
Via: Philstar