Market expert sees ABS-CBN’s P6-B deal fueling corporate comeback

Insider Spotlight

• Top investment banker Juan Paolo Colet calls ABS-CBN’s P6-billion capital raise a “fair deal” for existing shareholders.
• Investors are paying P3.65 a share, well above book value, signaling confidence in a potential turnaround.
• The expert sees a smaller ownership slice as a necessary trade-off for its comeback plan. 

ABS-CBN Corp.’s P6-billion capital raise is drawing a vote of confidence from a stock market expert, who sees the fresh money from new and existing stockholders as a major bet on the media giant’s return to profitability.

The assessment comes as ABS-CBN prepares to issue 1.64 billion new shares, significantly expanding its capital base as help fund its turnaround. 

“I think this is a fair deal for existing ABS-CBN shareholders,” Juan Paolo Colet, managing director at China Bank Capital, told InsiderPH on Friday. 

“The investors are coming in at a price of P3.65 per common share, which is way above the stock’s book value. This shows very strong confidence that they can pull off a turnaround that will restore the company to profitability,” he added. 

Juan Paolo Colet 

China Bank Capital managing director 

Bet on recovery

I&C Holdings Corp. is putting up P3.5 billion, while three Lopez family vehicles and Lopez Inc. are investing another P2.5 billion, giving ABS-CBN fresh equity without taking on more debt.

The trade-off is dilution: outstanding shares will nearly triple to 2.54 billion, meaning an existing investor who does not participate will own a much smaller percentage of ABS-CBN even though the number of shares they hold remains unchanged.

Public investors, for example, would see their collective stake fall from 41.62 percent to about 14.7 percent if the new shares are classified as non-public.

“The equity infusion would dilute existing shareholders and lower the float to around 14.7 percent, which would still meet the minimum public ownership requirement of at least 10 percetn. The dilution is a necessary sacrifice for the prospect of a corporate comeback,” Colet explained. 

The P6-billion infusion is ultimately a big bet by both the Lopez family and I&C that a better-capitalized ABS-CBN can recover, leaving existing shareholders with a smaller slice but potentially of a much stronger company. 

—Edited by Miguel R. Camus