Sinobangla stocks soar 54pc on rumours

Sinobangla Industries had not secured exorbitant profits that could have supported a high jump in its share price.  

Furthermore, it had decided to issue rights shares for existing shareholders, meaning that supplies of shares in the market would increase which normally reduces the issue price.

Its profits were up 0.83 per cent to Tk 3.61 crore in the financial year of 2021-22, for which it had declared 10 per cent cash and 1 per cent stock dividend.

Still rumours caused the share price to soar 54 per cent in the last 13 days.

Though its profits have remained almost the same, the share price rose to their highest Tk 91 on Thursday from Tk 58 on October 24.

As for the rumour, a number of market insiders told The Daily Star that it was over the stock market regulator asking small companies to raise their paid-up capital to over Tk 30 crore.

The company had a paid-up capital of Tk 19.99 crore when it commenced commercial operations in 1997.

It produces flexible intermediate bulk containers made of fabric, designed for storing and transporting dry, flowable products such as cement, fertiliser, rice, fish feed, soil and food grain.

Investors are misunderstanding the situation and buying the shares because when a company increases paid-up capital by issuing shares, its overall shares increase and its price drops, said a stockbroker preferring anonymity.

So, the price should fall rather than go up, he said.

As the company's profits and dividends have remained almost the same, the sudden jump in the share price was either a result of manipulation or a misunderstanding by investors, he said.

The company already declared rights shares, so the number of shares will rise, which may reduce the price, while the market is behaving in the opposite manner, he said.

The Bangladesh Securities and Exchange Commission (BSEC) should investigate, he added.

Sinobangla got listed with the stock exchanges in 1999. Some 30 per cent of its stocks are held by sponsors and directors, shows the Dhaka Stock Exchange data.

Turnover of the company rose 13 per cent to Tk 238 crore in the last financial year.

Mohammad Rezaul Karim, spokesperson of the BSEC, told The Daily Star that as the shares already soared by over 50 per cent within a few days, it was already in the watch list of the regulator.

Normally, the regulator keeps an eye on people buying shares in bulk and whether they are affiliated with the respective company or not.

If it finds any manipulation or breach of rules, it will take steps, he added.

Admitting that the efforts to increase paid-up capital cannot cause the share price to increase, he said investors should know the basic demand-supply theory.

Actually, many investors seek short-term gains overnight so they rush to act based on rumours not realising the reality, Karim added.