Familytex manipulated prospectus
Familytex (BD), a listed textile company, lied in its initial public offering (IPO) prospectus by saying that one of its sponsors was a South Korean national in a bid to create a positive impression among general investors, according to a probe.
When a company goes public through an IPO, it publishes a prospectus showing all potentials, challenges and financial situation so that investors can avail the information and decide on whether to buy its shares.
According to the prospectus, the South Korean man, Jun Kyung Won, and an Indonesian woman, Lianawarti Kuwidjo, own 40.33 per cent of the fully paid-up ordinary shares of Familytex (BD).
It said Won, a sponsor shareholder, holds 2.09 crore shares, which is 19.96 per cent of the total number of shares as of January 13, 2013.
However, the Bangladesh Securities and Exchange Commission (BSEC) found that the company had lied as Won had sold all of his shares before the listing in 2013.
Stock market analysts say general investors were misled because of the lying, but the share rose soon after the listing. It dropped to Tk 4.90 yesterday.
The BSEC found in an inquiry that Won received a total of 2.30 crore bonus shares against stock dividends declared by the company.
Sharing monthly shareholding status of sponsors and directors from January 2014 to January 2016, the company mentioned Won as its director.
"However, Jun Kyung Won informed that he had resigned from the board of the directors of Familytex BD on April 5 of 2012," the BSEC enquiry team said in a report.
Since then, he had never got involved in the company's board, management and operational activities. In this connection, Won submitted a certification of the Registrar of Joint Stock Companies and Firms too, it said.
Therefore, the company violated listing regulations and the BSEC imposed a fine of Tk 5 lakh on the then managing director, Mohammed Morshed.
However, the BSEC did not ask to know about the lie from its issue manager, Banco Finance & Investment.
A merchant banker, preferring anonymity, said companies normally provide false information whenever they have bad intentions.
The company's present financial situation explains the real reason behind the listing, which was nothing but dumping of low performing shares on general investors, he said.
"Due to its substandard performance, general investors have been affected."
The textile maker raised Tk 34 crore from the market.
Before the listing, it showed that its profits in 2011 amounted to Tk 9.6 crore against sales of Tk 100 crore.
It incurred a loss of Tk 5.33 crore against sales of Tk 62 crore in 2020, according to the latest annual report. It suffered losses in the previous year too.
Against the backdrop of a continuation of losses, the BSEC recast the company's board to elevate it from the Z category in March 2021.
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