Investors’ ‘abnormal’ hype surrounding any newly listed company has become a regular phenomenon in the country’s capital market and the latest about such hype was Oimex Electrode whose share prices shot up by 1,047 per cent on its debut on Monday.
The shares of Oimex, which were issued at Tk 10 each under the fixed price initial public offering method, closed at Tk 114.20 each, increasing by Tk 104 on the day due mainly to investors’ buying spree.
Former Bangladesh Securities and Exchange Commission chairman AB Mirza Azizul Islam termed such investment attitude as abnormal and stupid.
Asked about the share price movement of Oimex, Mirza Aziz, also former finance adviser to an interim government, said the price movement of the scrip indicated that investors were taking excessive risks in making investments on the shares of newly listed companies.
Investors should consider dividend track record, profit generating ability and tax return issues of any newly listed company before purchasing its shares, he said.
Considering Oimex Electrode’s close price of Tk 114 on Monday and Tk 2.09 earnings per share for the year ended on June 30 this year, its price earnings ratio skyrocketed to 54.64, much higher than the BSEC-allowed limit to grant margin loan for any scrip.
The capital market regulator does not allow margin loan for buying scirps with PE ratio above 40, considering those highly risky for investment, BSEC officials said.
Oimex declared 10 per cent stock dividend for its shareholders based on the earnings in the year ended on June 30, 2017.
Oimex, a company with Tk 45.89 crore paid-up capital, issued only 1.5 crore share through the IPO.
Of the company’s free-float shares, 76.94 lakh shares were already traded on Monday.
Due to its low number of fee-float shares and low paid-up capital, a group of people might have pushed the prices of the scrip up drastically, stockbrokers said.
Terming such movement of share prices of debutant companies as frustrating, United International University School of Business and Economics Dean Mohammad Musa told New Age that such movement could not be prevented unless investors learnt lessons from the previous instances.
He also said that unusual movement in the share prices of such newly listed companies had become a trend and a ‘matter of game’.
Besides the general investors’ irrational purchasing, a group of investors usually purchase shares of the debutant companies intentionally to create hype and to lure general investors to get quick returns, stockbrokers said.
Although the BSEC on a number of occasions formed investigation committees to look into the issue of unusual hike in the share prices of newly listed companies, none of the offenders have been brought to book, they said.
Apart from Oimex, an abnormal rise in share prices was also observed on debut trading day of most of the newly listed companies — BBS Cables Limited, aamra Networks Limited and Shepherd Industries.
The share prices of BBS Cable, which were issued at Tk 10 each, increased by 800 per cent on its debut on July 31 this year.
BBS shares increased to Tk 90 on its debut trading day and subsequently to Tk 149.7 in just 14 trading sessions amid investors’ indiscriminate purchasing of the scirp.
Considering BBS Cables’ close price of Tk 142 on Monday and earnings per share for the year ended on June 30 this year, its price earnings ratio stands at 48.63.
The share prices of aamra Network, which were issued at Tk 39, increased by 258.97 per cent to Tk 138.40 on its debut on October 2 this year and subsequently rose to Tk 144.5 in the fourth trading session of the scrip at the DSE.
The scrip, however, closed at Tk 116.20 on Monday after declining to Tk 102.60 on October 16.
On Monday, PE ratio of the scrip stood at 36, near the alarming level determined by the market regulator.
Issued at Tk 10 each, Shepherd Industries Limited’s share prices rose by 431 per cent or Tk 43.1 to Tk 53.10 in just two trading sessions on March 9 this year.
The prices of the scrip, however, declined to Tk 32.4 on Monday due to a gradual fall in its share prices.
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