SEC issues rejoinder (2)

The following is the second installment of the Securities and Exchange Commission’s letter in response to a 22 August 2024 column that had for its subject the underwriting of a planned follow-on offering of DITO CME Holdings Corp. titled “SEC’s Slip Shows.”

“Typewriter Fiend” is giving space to the letter in the interest of fair play:

To be clear, under the 2015 Implementing Rules and Regulations of Republic Act 8799, or the Securities Regulation Code (SRC), underwriters are not required to underwrite securities solely on a firm commitment basis.

They can agree on a different plan of distribution with the issuing company subject to approval by the SEC.

Nevertheless, in its registration statement for its planned follow-on offering (FOO), DITO CME Holdings entered into an underwriting agreement with BDO Capital on a firm commitment basis, in compliance with the requirement of the Philippine Stock Exchange (PSE).

Contrary to the claims made in the opinion piece, the prospectus submitted to and reviewed by the Commission clearly provided: After the commencement of the offer period, the offer shall not be withdrawn, canceled, suspended, or terminated solely by reason of the (i) inability of the Company or the Underwriter to sell or market the Offer Shares, or (ii) the refusal or failure by the Company, the Underwriter, or any other entity or person to comply with any undertaking or commitment to take up any shares remaining after the Offer Period.

The prospectus further provided that the Underwriting Agreement may not be suspended, canceled or terminated after the listing date.

Prior to the listing date, the underwriter may cancel or terminate its underwriting commitment but only in certain circumstances that would naturally bar an underwriter from fulfilling its obligations as such.

The underwriter may cancel or terminate the underwriting commitment before the listing date only upon limited, specified grounds such as an order by a competent government authority canceling or terminating the offer, sale, distribution, or issuance of the offer shares; cancellation or termination of the listing approval of the PSE; an order from a competent government authority to cease and desist from continuing any material portion of its operations; or a force majeure event, among others.

Prior to the commencement of the offer, the grounds upon which the underwriter may cancel or terminate its underwriting commitment are likewise limited, specified and clearly defined in the underwriting agreement and prospectus.

The withdrawal of the underwriter’s commitment is further subject to the strict provisions of the SRC and its implementing rules and regulations.

In case there is a valid ground to withdraw its underwriting commitment prior to the listing date, BDO Capital will be required to notify DITO CME Holdings, the Commission and the PSE, and to return all monies received, in accordance with the following rules:

Section 11.3 — If any of the events described in Section 11.1 above occurs, the Sole Underwriter shall provide the Issuer a five-day prior notice from such termination.

Section 11.4 — In all instances of termination of this Agreement, the Issuer and Sole Underwriter shall give notice to the SEC and PSE of the fact of termination, as well as the cause and circumstances surrounding the termination.

Section 11.5 — Immediately upon sending to the Issuer of a notice of cancellation or termination, the Sole Underwriter shall desist from receiving any Application for the Offer Shares and shall return or otherwise cause the Receiving Agent to return to the Applicants all monies so far received from them in accordance with Section 3.8.

(To be continued)