BATBC leads drop in stock index

Stocks of British American Tobacco Bangladesh (BATBC) led the market fall yesterday despite its earlier announcement of 600 per cent cash and 200 per cent stock dividends.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), dropped 37 points, or 0.68 per cent, to 5,557 yesterday.

Investors are now in the dark about BATBC's dividend adjusted price because its value would be lower than the floor price.

Last year, the stock market regulator set a floor price for all stocks so that they cannot drop further amid the Covid-19 pandemic induced economic slowdown.

When a company provides stock dividends, then its price is adjusted proportionately, an asset manager said.

"Let's say the closing price of a BATBC share is Tk 100 on its record date, the day when the dividend ownership is determined, then the company issues two more shares for a stock owner as it announced a 200 per cent stock dividend," he added.

As a result, the stock price of a BATBC share would be Tk 33, according to the asset manager.

As the company's stock price is still over TK 1,600 and it announced 200 per cent stock dividends with the floor price set at Tk 907.60 on March 19 last year, the adjusted price must go lower than the floor price, he said, adding the confusion about BATBC's adjusted price influenced the change in its value.

Its impact was clear on the index also, he added.

BATBC alone snared 16 points from the DSEX yesterday, according to data from Amarstock.com, a stock market analysis website.

"We don't know whether the stock market regulator would allow the company to fall under its floor price in order to adjust the stock dividend or remain at floor price," said Munna Raihan, a stock investor.

"This is a burning question now and due to the puzzling situation, its stock price is moving zigzag," he added.

BATBC's dividend announcement was published on the DSE website last Thursday, when its stock price rose 12 per cent to Tk 1,700. Yesterday the multinational cigarette maker's stock fell 5.96 per cent to Tk 1,599.

The regulator can set a new floor price for BATBC as the adjustment is necessary to obtain a market driven price, said a merchant banker preferring anonymity.

"I actually don't support setting a floor price for any stock even though it impacts the market positively," he said, adding BATBC's old floor price is no longer suitable as it announced a huge stock dividend.

"If the regulator allows it to continue at the previous floor price, then the price must be overvalued," the merchant banker said.

BSEC Spokesperson Rezaul Karim said the regulator will take a decision regarding the matter soon.

Last year, the company logged profits of about Tk 1,088.6 crore, up 36.9 per cent year-on-year.

BATBC declared the bonus shares by considering the utilization of its accumulated profit, which stood at Tk 3,213 crore for the year that ended on December 31 of 2020, the company said in a disclosure on the DSE website.

It issued stock dividends to achieve the optimum capital base considering its size and growth.

The bonus shares have not been declared from the capital reserve, revaluation reserve, any unrealized gain, out of profit earned prior to incorporation, by reducing paid-up capital, anything else would have put the post-dividend retained earnings in the negative or a debit balance, it said.

At the DSE, 57 companies' stocks rose, 193 stocks fell, and 101 remained unchanged.

Delta Spinners topped the gainers' list, rising 9.85 per cent followed by Keya Cosmetics, Taufika Foods and Agro Industries, Beximco and Beximco Pharmaceuticals.

Beximco topped the turnover list, trading worth Tk 217 crore followed by BATBC, Beximco Pharmaceuticals, Robi Axiata and LankaBangla Finance.

Prime Insurance shed the most, falling 9.65 per cent followed by Federal Insurance, Peoples Insurance, City General Insurance, and United Insurance.