The stockmarket regulator yesterday voided the share purchase deal between United Mymensingh Power Ltd (UMPL), a corporate director of United Power Generation, and a foreign company due to irregularities in the agreement process.
The corporate director of United Power Generation, listed on the Dhaka and Chittagong stock exchanges, failed to submit any information on the owners of the foreign company, said the Bangladesh Securities and Exchange Commission (BSEC) in a press release yesterday.
It also did not follow the securities rules and regulations when determining the valuation of the shares.
The agreement was to sell 75.07 lakh shares worth Tk 476.60 each -- which is way higher than the stock's peak price of Tk 419 -- through call option, which is forbidden by the country's rules, the BSEC said.
Call option is a financial contract to buy an agreed quantity of a financial instrument from a seller at a certain time for a certain price.
The buyer can decide not to make the purchase but for this right it pays a fee when the contract is signed.
So, the regulator has decided to void the share purchase agreement that took place on March 31, 2019.
The company informed the BSEC on April 7 about the agreement, but it did not notify its investors through the Dhaka Stock Exchange website, as stipulated by the rules.
“How come the corporate sponsors do not have any information on the owners of the foreign company?” asked a top official of the DSE.
The sponsor might have pulled this stunt to influence its stock's price, which has been flagging.
Riding on the rumours of an entry of a foreign company, United Power Generation's stock price rose 166 percent to Tk 419 between April last year and February this year.
But upon rumours that the share purchase agreement was voided, United Power Generation stock fell 23 percent in the last one month to Tk 322.
“So, it deserves a huge punishment,” the DSE official said.
The stock's tumble impacted the market heavily as its market capitalisation is very big, he said, while calling for investigations from the stockmarket regulator.