Investors taken for ride 'directly' Dhaka, Jan 24 (bdnews24.com)—As efforts are on to find out the real reasons why the small investors are on a roller coaster, direct listing is being discussed as one that gave them a raw deal. The direct listing of companies that gave the overheated market some of the most overpriced stocks has been one of the mistakes that the ministers and regulators now admit. "Of course, the SEC [Securities and Exchanges Commission] had made mistakes while handling the market, or else, the situation would not have come to such a pass," AMA Muhith, the finance minister, said on Friday. "I must have made some mistakes too," Muhith said. So far, 10 companies have enjoyed the privilege of being listed directly. Seven — five state-owned and two private—were directly listed on the DSE during 2006-08 period. The five government-run companies were Desco, Powergrid, Jamuna Oil, Meghna Petroleum and Titas Gas. The two private companies were Shinepukur Ceramics and ACI Formulations. For the eighth company that was given the privilege—in one glaring instance of irrational behaviour from the stakeholders—investors paid 20 times the face value. In the last two years of the Awami League-led government, three companies have been allowed to list directly. The first, in 2009, was Navana CNG at an average price of Tk 200 per share of Tk 10 each at a PE Ratio of 50. The sponsors of Navana CNG raised a staggering Tk 363 crore from the market. The instance drew strong criticism from different quarters— including the parliamentary committee on the finance ministry—because of its high price and the consequent high PE Ratio. The reaction forced the SEC to announce that no more direct listings would be allowed. At the time of this notification, there were three direct listing applications awaiting SEC clearance. These were Khulna Power (KPCL), Ocean Container Line (OCL) and Westin Hotel. Later, SEC allowed KPCL and OCL to directly list in violation of its own notification; the two raised nearly Tk 1600 crore. Westin was not cleared. A former DSE president Rakibur Rahman, who was at the helm then, says that the DSE had nothing to do with allowing the direct listing of the two entities owned by energy giant Summit Group. "We banned direct listing for private sector companies after the Navana CNG experience," said Rahman. The DSE was, however, in favor of allowing state businesses for direct listing. "That way, the money raised remains with public or the government. But, in case of private sector it goes to the pockets of the directors of the companies," the top broker told bdnews24.com. Summit Group chairman Muhammad Aziz Khan sought to defend the exorbitant prices fixed at the time of direct listing. "I don't think they were overvalued," Khan said, responding to bdnews24.com. "KPCL grew by 150 percent in the last one year," he claimed. The Summit chief, younger brother of commerce minister M Faruk Khan, was not ready to discuss OCL when bdnews24.com correspondent Abdullah al Muyid finally reached him early Monday afternoon. Aziz Khan revealed he had "applied" to SEC on Thursday, the day the market plunged to new depths, to let him "buy back" some of these shares from those who would feel they had been short-changed by very high initial prices. Sponsors of KPCL and OCL raised Tk 1560 crore from the market at an average price of Tk 225 and Tk 325 per share of Tk 10 each at PE Ratio of 98 and 81 respectively. The figures far exceeded those for even Navana CNG which had resulted in such a hue and cry only a few months earlier. On Jan 20, when the market shed 600 points in less than six minutes, KPCL stocks were last traded at Tk 85, OCL at Tk 106 and Navana CNG at Tk 132. More than two-thirds of the value of KPCL and OCL had simply vanished. One only wonders if the sponsors of KPCL & OCL could have raised such sums of money at these ridiculously inflated prices without cooperation from SEC, DSE and finance ministry officials. Only an independent enquiry can find out those responsible for reversing the direct listing decision allowing these companies to take the small investors for a ride. Fingers have been pointed time and again at senior SEC officials who allegedly connived with sponsors or directors, big time brokers and high net worth investors to manipulate some of the prices. Only two days ago, a former central bank governor went public criticising the SEC for its failure to protect the investors' interests. There have been instances when SEC issued directives and reversed those within days and in one instance within hours. The point for those probing would be to see who bought shares of these companies just before and after these regulatory steps. http://www.bdnews24.com/details.php?cid=2&id=185403&hb=1 |
__._,_.___
