Solar Philippines NEC offering payment plan for SRO
Solar Philippines NEC [SPNEC 1.67 2.34%] [link], the upstart solar project developer owned by Leandro Leviste, provided an updated prospectus for its “mini” stock rights offering (SRO), and revealed that it is offering two incentives to shareholders to invest: a potential discount, and an installment payment plan.
The deal: The SRO itself will see SPNEC sell 1,875,649,995 common shares to existing shareholders, at a price of between P1.50 to P1.76/share, with an entitlement ratio of 1 SRO share for every 1.28 SPNEC shares already owned by the record date, which is on August 25. Tentatively, SPNEC will price the offer on August 18, and conduct an offer period between August 30 and September 5, before finally listing the SRO shares on September 15. As Mr. Leviste notes, these dates are all tentative pending an official schedule from the PSE.
The discount: SROs are usually priced at a discount, to reward shareholders for protecting their proportional stake by participating in the capital call. The price range of P1.50 to P1.76 represents, at the low end, a discount of 10% off of SPNEC’s closing price of P1.67, and at the high end, a 5% premium. SPNEC wouldn’t sell the shares at a premium, so it’s obvious that SPNEC and its advisors believe that there’s a chance that SPNEC could trade higher over the next month before the pricing date, and so they’re leaving themselves some space to take advantage of that potential increase in case it happens.
The installment plan: This is the interesting part! Anyone interested in buying SRO shares can either do it the same old boring way, by paying the full amount on the day they purchase, or the cool new way, which is in installments by providing a 25% down payment on the day they purchase, and then paying the remaining 75% at any time over the next three months.
What happens if it goes unpaid? The prospectus calls these “delinquent Rights Shares”, and says that SPNEC reserves the right to extend the payment period for delinquent Rights Shares, or to auction delinquent Rights Shares off. SPNEC said that it might buy any delinquent Rights Shares that go without bids, and if they do, those shares would become treasury shares. SPNEC said that in the case the delinquent Rights Shares are sold at auction, any down payment made will be “forfeited in favor of SPNEC”. I followed pretty well up until that last part, when it sounded like SPNEC would sell the entire lot of shares to someone else, and then also keep the down payment. Maybe I’m reading it wrong, but it seems weird that SPNEC would keep the deposit, when the deposit represents 100% payment for 25% of the requested allocation. Doesn’t it make more sense to allow the purchaser to keep the 25% of shares that they paid for, and then auction off the unpaid 75% without any punitive forfeits?
Use of proceeds: According to earlier disclosures, this SRO was meant to facilitate what I referred to as “hitting the turbo button”, by allowing SPNEC to purchase interests in projects with Enrique Razon’s Terra Solar and Prime Infra from its parent company, Solar Philippines. The initial disclosure said that Solar Philippines would grant SPNEC the option “to accelerate the development of the project site using the proceeds of an SRO”, where “project site” refers to the projects with Terra Solar and Prime Infra, but this updated prospectus says that the money will be put toward purchasing land for the expansion of its original Nueva Ecija site, for the benefit of its “Sta. Rosa Nueva Ecija 2 Solar Power Project”, presumably since money that would have gone toward that undertaking has been re-allocated to the purchase of that stake in the Terra Solar and Prime Infra projects.
MB BOTTOM-LINE
This isn’t the mega-SRO that SPNEC will need to do in the future as part of the massive share swap with its parent company, Solar Philippines.
This mini-SRO was only (originally) meant to free up some capital to acquire those assets from Solar Philippines that related directly to those Enrique Razon projects.
That still seems to be happening, but now it’s in more of a “money is fungible” kind of way than a situation where the proceeds from the SRO are directly applied to purchasing the stakes in the Enrique Razon projects.
Either way, it’s great to get some additional information from SPNEC on the state of this SRO.
My only hope is that SPNEC is able to reveal the pricing of the offer before the ex-date to allow shareholders (and potential shareholders) the chance to make a well-reasoned investment decision!
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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