Market in distress amid jump in share sales by cos’ directors

A surge in share sales by directors of the listed companies, which fuelled a seven-week bear run at the stock market in the country, has become a major concern for investors and regulators.
Directors of a number of listed companies sold shares worth around Tk 245 crore in just seven weeks, shrugging off the bearish movement at the market.
DSEX, the key index of Dhaka Stock Exchange, declined by 297 points in last seven consecutive weeks to close at 5,653.21 points on March 14.
The directors sold the shares mostly in the public market.
The directors of Monno Ceramics sold shares worth Tk 122 crore despite the company posting 380 per cent profit growth to Tk 8.13 per share in July-December, 2018 compared with that of Tk 1.69 per share in the same period of the previous year.
Investors frown upon the company’s unprecedented profit growth and the directors’ significant share sales at the same time.
The directors of Nurani Dyeing sold 70.32 lakh bonus shares worth Tk 11.25 crore, those of Dragon Sweater sold 52 lakh shares (in public market) worth Tk 9.36 crore while those of Doreen Power sold 70 lakh shares (40 lakh in block and 30 lakh in public markets) worth Tk 59 crore in the seven weeks.
DSE officials said apart from the declared share sales by the directors, many directors of the listed companies had been selling shares without any declaration violating securities rules.
Shareholding by sponsor-directors of Family Textile was 22.43 per cent in June, 2018 that declined to 4.02 per cent in January, 2019, according to DSE. The sponsor-directors of the company offloaded their holdings without any declaration, breaching securities laws.
According to the securities law, directors of the listed companies cannot sell shares if their joint-shareholding falls below 30 per cent.
Bangladesh Securities and Exchange Commission is investigating the matter, BSEC officials said.
Market operators said that the companies with the connivance of other connected people got the share prices to a level where the directors could dump the shares on public.
DSE director Minhaz Mannan Emon told New Age that the bourse had detected asymmetry, irregularities and unethical practices in share trading by the companies’ directors that now reached to an unendurable point.
The sponsor-directors were not supposed to trade shares like general investors, rather they were supposed to concentrate on business expansion through a number of business tactics and raising capital from the market, he said.
He also said that directors of different entities were found selling huge amounts of shares without any declaration.
The evil practices stirred up volatility at the market as investors lost confidence on the market, he said.
According to market experts, the market regulator cannot put a blanket ban on directors’ share sales, but it can prevent wholesale share sales by directors by strengthening its surveillance over the market.
They also said that issuing significant amount of pre-IPO placement shares and declaring bonus dividends year after year were the main reasons for the continuous shares sales by the directors in the public market.
The regulator should supervise issuance of placement shares and bonus shares to bring order to the market.
DSE officials claimed that the companies’ directors with the connivance of the companies’ management sold the shares through their own (companies) brokerage houses.
There is a sense of angst among the stakeholders that BSEC has not done enough to check irregularities and there is no respite in sight, they said.
Considering the overall situation, BSEC has decided to introduce auto-flagging system at Central Depository Bangladesh Limited to block sales of shares by sponsors/directors of the listed companies without any disclosure.
The mechanism will not also let the sponsors/directors sell shares if they fall short of holding 2 per cent shares individually and 30 per cent jointly.
Source: A surge in share sales by directors of the listed companies, which fuelled a seven-week bear run at the stock market in the country, has become a major concern for investors and regulators. Directors of a number of listed companies sold shares worth around Tk 245 crore in just seven weeks, shrugging off the bearish movement at the market. DSEX, the key index of Dhaka Stock Exchange, declined by 297 points in last seven consecutive weeks to close at 5,653.21 points on March 14. The directors sold the shares mostly in the public market. The directors of Monno Ceramics sold shares worth Tk 122 crore despite the company posting 380 per cent profit growth to Tk 8.13 per share in July-December, 2018 compared with that of Tk 1.69 per share in the same period of the previous year. Investors frown upon the company’s unprecedented profit growth and the directors’ significant share sales at the same time. The directors of Nurani Dyeing sold 70.32 lakh bonus shares worth Tk 11.25 crore, those of Dragon Sweater sold 52 lakh shares (in public market) worth Tk 9.36 crore while those of Doreen Power sold 70 lakh shares (40 lakh in block and 30 lakh in public markets) worth Tk 59 crore in the seven weeks. DSE officials said apart from the declared share sales by the directors, many directors of the listed companies had been selling shares without any declaration violating securities rules. Shareholding by sponsor-directors of Family Textile was 22.43 per cent in June, 2018 that declined to 4.02 per cent in January, 2019, according to DSE. The sponsor-directors of the company offloaded their holdings without any declaration, breaching securities laws. According to the securities law, directors of the listed companies cannot sell shares if their joint-shareholding falls below 30 per cent. Bangladesh Securities and Exchange Commission is investigating the matter, BSEC officials said. Market operators said that the companies with the connivance of other connected people got the share prices to a level where the directors could dump the shares on public. DSE director Minhaz Mannan Emon told New Age that the bourse had detected asymmetry, irregularities and unethical practices in share trading by the companies’ directors that now reached to an unendurable point. The sponsor-directors were not supposed to trade shares like general investors, rather they were supposed to concentrate on business expansion through a number of business tactics and raising capital from the market, he said. He also said that directors of different entities were found selling huge amounts of shares without any declaration. The evil practices stirred up volatility at the market as investors lost confidence on the market, he said. According to market experts, the market regulator cannot put a blanket ban on directors’ share sales, but it can prevent wholesale share sales by directors by strengthening its surveillance over the market. They also said that issuing significant amount of pre-IPO placement shares and declaring bonus dividends year after year were the main reasons for the continuous shares sales by the directors in the public market. The regulator should supervise issuance of placement shares and bonus shares to bring order to the market. DSE officials claimed that the companies’ directors with the connivance of the companies’ management sold the shares through their own (companies) brokerage houses. There is a sense of angst among the stakeholders that BSEC has not done enough to check irregularities and there is no respite in sight, they said. Considering the overall situation, BSEC has decided to introduce auto-flagging system at Central Depository Bangladesh Limited to block sales of shares by sponsors//directors of the listed companies without any disclosure. The mechanism will not also let the sponsorsdirectors sell shares if they fall short of holding 2 per cent shares individually and 30 per cent jointly.

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