Trading of shares of Zeal Bangla Sugar Mills was halted yesterday till further notice after the Bangladesh Securities and Exchange Commission (BSEC) detected unusual transactions and price movements.
The stock price of the state-run company, listed with the bourses in 1988, has skyrocketed over fivefold to Tk 210 from Tk 38 in a span of just one and a half months.
In the past two years, it had remained flat between Tk 35 and Tk 45, according to data from Dhaka Stock Exchange.
The company's paid-up capital is very low, making it a target for gamblers seeking to manipulate trading, said a top official of the stock market regulator preferring anonymity.
Its paid-up capital stands at Tk 6 crore but the company's cumulative loss amounts to Tk 370 crore.
The most common form of gambling in the market occurs whenever scamsters are able to get their hands on nearly all of a company's stocks.
A company having low paid-up capital means the number of shares it has in the market is relatively small. Gamblers target these stocks as it is easier to carry out the manipulation.
They strategically time purchases and sales so that the stocks change hands just among themselves. This causes the price to rise even if the company's dividend payout keeps very low while the brand value stays limited.
Once the high prices start attracting investors with poor judgement and analytical skills, the fraudsters dump all that they own and exit the market with the loot.
"We detected that stocks of the long-running lossmaking sugar mill company were being played with, so we stopped the trading," the official said.
"At first we will investigate the reason behind the price hike and find the people behind it. And then we will punish them," he added.
As the company has been incurring losses for many years, the regulator will talk with the company as well and then decide on whether to start the trade again, he said in response to a question. The commission will take immediate steps if anyone is found involved in any wrongdoing with any stock, he added.
"The BSEC has done the right thing," said a stock broker requesting not to be named.
Gamblers are playing with the company's stocks but none has been punished yet, he said, adding that the punishment should be exemplary.
If the company has no potential, it could be delisted through the return of investors' money because it will encourage nothing but gambling in the stock market, the broker added.