More bad news for Ring Shine investors
The news of offloading of shares by a key sponsor of Ring Shine Textile yesterday, within just two and a half months after its listing on the Dhaka and Chattogram bourses, is yet another blow to the general investors, who have seeing the value of their holdings plummet by the day.
Universe Knitting Garments, whose owner Sung Wey Min is the sponsor and managing director of Ring Shine Textile, announced yesterday its plan to sell 36.86 lakh shares of the textile company.
Sung also holds 6.52 per cent, or 1.85 crore, shares of Ring Shine Textile individually.
The news dragged down the textile maker's stocks by 3.61 per cent to Tk 8 yesterday.
Market analysts said when a company's sponsor sell shares just after listing it gives a bad signal to the general shareholders.
Ring Shine Textile debuted on the bourses on December 12 last year to raise Tk 150 crore from general shareholders.
Soon after the listing rumours have been running rife that the textile maker's foreign staff, directors and managing director were abandoning the venture and leaving the country for good.
However, they came back to work later.
Amid the situation, Universe Knitting Garments yesterday expressed its intent to offload 13 per cent of its total holdings of 2.82 crore shares at prevailing market price.
Universe Knitting did not inform the textile maker why it was selling the shares, said Asraf Ali, company secretary of Ring Shine.
"This is an internal decision of the owners," he added.
Abdul Mannan, a stock investor, said the stock tumbled to less than its face value when the rumours of its foreign owners jumping ship spread.
Now, the key sponsor's share selling will have bigger impact on general investors.
"So, its stock price is declining," he said.
A top official of the Bangladesh Securities and Exchange Commission (BSEC) said the regulator cannot deter a sponsor from selling his/her shares if they are doing so by abiding by the laws.
Under this circumstances, stock investors should be cautious about investing in the stock, he said, adding that the BSEC is now giving approval to initial public offerings on a disclosure basis.
A merchant banker said such share selling by a sponsor at a price of under the face value means the company's stakeholders themselves do not think it has a bright future.
And their selling so soon after the company's debut on the bourse also means sponsors always had the plan to cash out right after listing.
"A sponsor can sell his/her shares. But when he does so under face value then it raises questions about the company's potential," he added.
According to the company's annual report for the 2018-19 financial year, its sales dropped 1.72 per cent to Tk 982.37 crore from a year earlier.
The net profit margin also decreased from 5.54 per cent to 5 per cent during the period.
Sung said in the annual report of the 2018-19 financial year that the company's sales and profitability decreased because of an increase in production cost by almost 1 per cent, and a decline in the price of goods sold in market.
Ring Shine's capital raising has been shrouded in controversy from the very beginning because it raised a huge amount of money, said Sharif Anwar Hossain, president of DSE Brokers Association of Bangladesh.
"Many stock brokers were saying that the company was coming to the market in order to dump its shares on the general shareholders."
So, general investors should have been more cautious, Hossain said, adding if investors did not buy its shares the company would not have been able to come to the market.
"However, our investors rushed to snap up Ring Shine shares. They also need to assess what shares they should buy and what not to."
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