KARACHI, March 21: The capital market regulators have proceeded to speed up the ‘delisting’ of defaulter companies and understandably so.
Shares have rallied at the stock market, carrying the KSE-100 index considerably above the 13,000 level. And everyone who has anything to do with the stocks knows that beyond the 9,000 points, the market has been supported by what are referred to as ‘second and third-tier stocks’.
A long list can be drawn of such stocks that have awakened from years of hibernation and climbed to dizzy heights.
Almost two dozen companies have seen their stocks jump between 50 to 450 per cent in the last two months -- from their previously frozen values. Is that all value-addition genuine or are unsuspecting small investors being trapped?
Retail investors with small means are picking up low priced stocks of companies that are either dead or dying. All that the regulators seem to have thought of is to glance deeper into such companies that come handy and go along with delisting or suspension.
Compared to just 7 companies last year, a total of 47 companies have already been ‘delisted’ during the current year, including 22 companies in the month of March alone.
Even so, many market watchers believe that the action of ‘suspension and delisting’ may have come too late.
The regulators have mentioned that suspension and delisting have been ‘in the interest of trade and public’ and to warn new shareholders of the pitfalls. But how about the small shareholders already stuck up with shares that they hold in such companies. And many thousand more who may have only recently bought the ‘second and third tier’ worthless stocks. When the tables are finally turned, it would surely be those unlucky retail investors who would be under them. Should the regulators have acted earlier and put up lifeguards to keep such innocent small shareholders away? May be, but it appears that the rule of ‘caveat emptor’ (buyer beware) prevails.On Wednesday, the KSE issued yet another notice to suspend trading in a dozen companies. The reason for the suspension was noted as “failure to company with the instruction of the exchange to fulfill the requirements of Listing Regulation regarding the induction of shares of companies into the Central Depository System (CDS) within 90 days ie up to March 21. The companies included: Sardar Chemical Industries; Climax Engineering Company; Shakerganj Foods; Data Agro; Gauhar Engineering; Fatima Enterprises; Fateh Industries; Fateh Sports Wear; Globe Textile Mills (OE); Ishtiaq Textile Mills; Noor Silk Mills and Suhail Jute Mills.
The KSE stated that trading in shares of those would be suspended wef March 22.
The bourse said that the sponsors/majority shareholders of the concerned companies were directed to provide to all concerned shareholders an option for selling their shares to them at a price fixed by the Exchange in accordance with Regulations, followed by delisting of the companies.
The KSE issued a threat that made some people chuckle: “In case of failure of the sponsors/majority shareholders of the companies to comply with the compulsory buy back direction within 30 days ie up to April 20, the Exchange will proceed to delist such companies under the Listing Regulations” and the bourse also issued a warning that seemed to sound almost hollow: “The cases of the companies will also be forwarded to the SECP for initiating further action under the Companies Ordinance,1984 against the companies/management as may be deemed appropriate.”