BSEC imposes 3-year lock-in on Ring Shine’s shares held by Universe Knitting

Staff Correspondent | Updated at 11:40pm on November 05, 2019

The Bangladesh Securities and Exchange Commission on Tuesday extended the lock-in to three years on the shares held by Universe Knitting in Ring Shine Textile Limited which was awaiting enlistment at the stock exchanges.

Sung Wey Min, managing director of Ring Shine Textile, is the chairman of Universe Knitting while around 2 crore placement shares of Ring Shine were issued to Universe Knitting.

As per the BSEC rules, shares of sponsors and director of any IPO-seeking companies are subject to three year lock-in while the lock-in period on placement shares is one year.

The commission, however, extended the lock-in period on Ring Shine shares held by Universe Knitting following observations from the Dhaka Stock Exchange and an online media report.

‘Although a media report claimed that Sung’s share in Ring Shine Textile and his affiliation with the company was not specified in the IPO prospectus of Ring Shine Textile, the information of Sung’s affiliation with Universe Knitting was incorporated in the IPO prospectus,’ the BSEC press release said.

This was why the commission had found no deviation of rules in this connection, it said, adding that the decision to extend the lock-in, however, was taken in the greater interests of the investors and the market.

Earlier, the DSE had asked for details about Universe Knitting from the company which it bypassed and led to dissatisfaction among the DSE management, said an official of the bourse.

He said that it was unethical for a MD or sponsor director of a company to buy huge amounts of placement shares of the company through another entity he was affiliated with without proper declaration.

DSE sources said that the owner of a company usually bought placement shares of its own company to dump the shares on the public in the secondary market.

In Ring Shine’s case, it has offloaded almost 68.46 per cent to the public, including placement shares, keeping around the mandatory 30 per cent shares in hand.

According to the IPO prospectus of Ring Shine, the company had received Tk 275 crore of share money deposits from some investors in 2006 to 2012 which was turned into paid-up capital in 2018 after getting approval from the BSEC in 2018.

Besides, the share money deposits were withdrawn and utilised before it had turned into paid-up capital that should have been investigated thoroughly, said a DSE source.

Market experts said that it was unethical and against the spirit of laws to withdraw funds from the share money deposit accounts and utilise the funds before issuing shares.

They questioned why the company had waited for so many years to turn the deposit money into paid up capital is a big question.

Recently, Coppertech Industries had its IPO approved by the BSEC amid allegations of creating artificial paid-up capital as it repeatedly deposited and withdrew small amounts of funds, as per the share deposit bank statement.

Despite many reports about financial engineering and criticism about its approval, the BSEC didn’t backtrack from allowing listing of the company in the secondary market.

Ring Shine company secretary Ashraf Ali, however, told New Age that the company had followed the existing IPO rules properly.

‘The share money were deposited, utilised and carried on as share money deposit in the company for the corresponding periods as per mutual commitment of the company management with the respective depositors,’ he said.