Tag: pldt

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PLDT and Rocket Internet

Almost a month ago PLDT invested in Rocket Internet, an e-commerce company known primarily for bringing successful US e-commerce ideas outside of the US. An example of their products is Lazada which aims to be the Amazon of Southeast Asia.

Original investors 90.00%
PLDT 10.00%
100.00%

Just a week later, United Internet also invested in Rocket Internet via new shares diluting PLDT’s share. Bummer. But hey, what can you do?

Original investors 80.70%
PLDT 8.60%
United Internet 10.70%
100.00%

Now the Rocket Internet IPO draws near. The IPO will be done via new shares which will further dilute PLDT’s share. Again Bummer. But hey, again what can you do?

Original investors 61.33%
PLDT 6.54%
United Internet 8.13%
Public 24.00%
100.00%

Well, I’m not doing anything. At the moment, that is. So maybe I can see how the IPO will impact PLDT’s value.

min mid max
IPO Price 35.5 39 42.5
Raised value (EUR B) 1.34 1.48 1.61
Existing value (EUR B) 4.26 4.68 5.10
Company Value (EUR B) 5.60 6.15 6.71
PLDT’s shares value (6.79%) 0.37 0.40 0.44
PLDT’s investment 0.333 0.333 0.333
0.03 0.07 0.11
Return 9.95% 20.79% 31.63%
Market Cap (PHP B) @close 9/29 690.00
Market Cap (EUR B) 12.04
Market Cap Impact 0.28% 0.58% 0.87%

It looks like the Rocket Internet investment is good (potentially 9.95-31.63%) but unfortunately it’s just a small part of PLDT’s overall asset portfolio and its post-IPO valuation will have little impact (0.28-0.87%). At the moment, that is.

PLDT’s investment includes strategic partnerships “to drive the development of online and mobile payment solutions in emerging markets” (that’s according to PLDT). That just might deliver dividends in the future that are not (yet) priced in.

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PLDT DigiTel Purchase

After long months, the purchase of DigiTel by PLDT was finally approved by the National Telecommunications Council (NTC). Of course there still are opposers particularly a congressman who cited Section 15 of Digitel’s franchise (Republic Act No. 7678), granted in 1994, which says that Digitel:

“…shall not lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other corporation or entity without the prior approval of the Congress of the Philippines.”

Okay, that’s fine since PLDT is buying DigiTel and not its franchise directly. But then it goes on:

“Neither shall the controlling interest of the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity without the prior approval of the Congress of the Philippines.”

This is interesting since it effectively means it is illegal to buy even a single part or share of DigiTel without prior approval from congress. So if you bought a share of DGTL you’re a lawbreaker. Nice.

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The Math of Company Ownership

The Supreme Court is at it again with their whimsical decisions. They have decided to change the rules in the middle of the game. They have decided that ownership is only achieved through common stock and not preferred stock. So with their new formula, PLDT is now 64% foreign owned. And the same goes for more than a few other companies.

How they came to that decision boggles me. A company is the sum of its assets. And assets are purchased with equity and possibly debt.

A = D + E

In accounting both common stock andpreferred stock are owner’s equity.

A = D + (CS + PS)

Debt is borrowed money and is paid off with interest. Equity is owner’s money and shares benefits from earnings via dividends or suffers from losses. And preferred stocks get first dibs at dividends. If you look at it this way, preferred stock is more ownership than common stock.

Now, if the company is to be dissolved and the assets liquidated or sold,

A = D + (PS + CS)

$$$ = D + (PS + CS)

Debtors collect first,

$$$ – D = PS + CS

$$ = PS + CS

followed by preferred stockowners,

$$ – PS = CS

$ = CS

and finally common stock owners.

$ – CS = 0

If you look at it this way, preferred stock is more ownership than common stock. In fact the only thing going for common stock is it’s decision-influencing attribute via stockholder vote.