Suspect manipulation as company is in loss
Zarif Mahmud: Share price of Legacy Footware, a listed company of tannery sector in the country’s capital market, have been rising abnormally despite the continuous business declines and losses and investors not getting the expected dividends year after year. Although the company’s business is in loss, the share price has been taken up to Tk 140 through manipulation in the last six months. The share price reached the highest position in the last two years. But several times earlier, the share has been fined due to manipulation. Market participants said that a part of that old manipulation cycle has been manipulated again and the share price has been taken so far. It is said that this manipulation is mainly centered around the issue of new shares of the company to increase the paid-up capital. Those who own the shares and those who are manipulating, will profit by increasing the share price abnormally. It is known that the company’s board members, promotors and officials are involved in this matter. Therefore, the regulatory body Bangladesh Securities and Exchange Commission (BSEC) needs to increase its surveillance and stop manipulation to keep the market normal, they said.
A review of the company’s financials shows that the company, which was listed in 2000, has paid the highest five percent cash dividend to investors twice so far. And the company has given cash dividend only three times in the last 22 years. According to the financial statements of the last five years, the amount of assets has decreased along with the business and profits. In 2018, the company’s net profit was
Tk 2.29 lakh. And in 2022, the last company had a loss of Tk 1.12 crore. That means the company has gone from profits to big losses in the last five years. Meanwhile, in 2018, the company’s net asset value per share was Tk 17.57. And at the end of 2022, the net asset value per share of the company stood at Tk 9.83. On the other hand, in the last 9 months of the fiscal year 2022-23 (July-March), the company suffered a loss of more than Tk 1.17 crore. Asset value per share has been Tk 8.93.
Meanwhile, the company’s share price and transaction figures show that the company’s share price is currently at its highest level in two years. In the last five months, the share price of the company has increased from Tk 39.30 to Tk 140. In this, the share price of a loss-making company increased up to Tk 100 in five months. It showed that the share price was last Tk 39.30 on February 28. After this, the share price was raised up to Tk 140 on July 27 through increase and decrease. The share price at the end of trading on July 30 was Tk 130.
Meanwhile, trading figures showed that the stock traded at the highest level in the last five months in two years. Out of this, 36,630 shares were traded on February 28 and 24,165 shares were traded on March 19. During the manipulation, the share was first traded at 14 lakh 24 thousand 559 on April 10. After that, 16 lakh 57 thousand 729 shares were traded on May 22. Later, the trading of shares continued to decrease. A total of 9 lakh 78 thousand 730 shares of the stock were traded on July 30.
Earlier, the board of directors of the company said that it will raise a total of Tk 30 crore by issuing 3 crore ordinary shares at a face value of Tk 10, which will cover the working capital shortfall of the company. As there is no opportunity to raise capital by issuing bonus shares or right shares in the overall economic situation, the company wants to raise capital by issuing new shares, which is one of the reasons for share manipulation, said the stakeholders.
Meanwhile, Dhaka Stock Exchange (DSE) asked Legacy Footwear several times to know the reason for the unusual increase in the company’s share price. However, Legacy said there was no price-sensitive information behind the unusually high share price and they did not know the reason for it.
Market participants say that shares of many fundamental companies are currently stuck at floor prices. But the share prices of most companies with weak fundamentals are constantly rising. One of them is Legacy Footwear shares. Despite the loss-making company, its share price is soaring. The company has not paid good dividends since its listing. The business has consistently declined and is now in losses. Earlier, some people have been fined for manipulating shares of this company. But even though the company is being manipulated now, BSEC has no attention.
Stating that company-related persons and shareholders with more shares are doing this manipulation, they said that earlier it is known that several people were involved in the company’s board, entrepreneurs and officers in the share manipulation of the company. Also, these manipulations are done with the connivance of those who have more shares of the company and the institutional shareholders. The company will issue new shares. Those who have shares in it will get shares. As a result, those who have more shares of the company will manipulate and increase the price and then sell them at a higher price. Those who buy shares at that time will face a big loss. So BSEC should take action in this regard now. They said that it is important to stop the manipulation of the company and keep the trust in the market by punishing those concerned.
To find out about this, the secretary of the company Abdul Baten Bhuiyan (current duty) did not receive calls. After that, when he was messaged on the phone, he did not reply until this report was written.
Incidentally, in 2019, BSEC fined four individuals and their related organizations a total of Tk 50 million for manipulating the shares of two companies including Legacy Footwear. BSEC warns Commerce Bank Securities Limited for cooperating with these individuals and institutions. Saiful Islam, the then senior vice president (SVP) of the brokerage firm, was alleged to have fueled the share manipulation of these companies.
According to the information, the commission’s investigation found irregularities in the share transactions of BD Autocars Limited and Legacy Footwear. Abdul Qayoum & Associates (Abdul Qayoum, Maryam Nesha and M/s Qayoum & Sons), Moinul Haque Khan & Associates (Padma Plus Limited, Padma Jones & Collar Limited Unit-2, Rahmat Metal Industries Limited), Mahfuz Alam, Commerce Bank Securities and Investment Limited and Md. Azimul Islam & Associates (Md. Azimul Islam, Latfun Nesha Islam, Nabila Islam, Azizul Islam, Alif Textile Mills, Baitul Khamur) were involved.
Such actions are a violation of securities laws. And for being involved in share manipulation by breaking the law, the commission fined Tk 2 crores to Abdul Qayoum and Associates, Tk 10 lakhs to Moinul Haque Khan and Associates, Tk 1 crore to Mahfuz Alam and Md. Azimul Islam & Associates has been fined Tk 2 crore. At the same time, the Commission will issue a warning letter to Commerce Bank Securities and Investments.
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