Lock-in on Asiatic Lab shares extended amid price manipulation concerns

The securities regulator has extended the lock-in period by at least three years on the shares held by sponsors, directors, and placement holders of Asiatic Laboratories, citing their alleged intention to offload shares after inflating prices through the publication of "unrealistic" price-sensitive information (PSI).
The earlier lock-in period was to expire on March 5 this year.
Earlier in September last year, the company, through a stock exchange filing, announced that its board of directors had unanimously approved the construction of a building, namely Time Square - Dhaka, on a 20-katha land in the capital's Tejgaon Commercial Area.
The stock of Asiatic Laboratories jumped 53 per cent to Tk 68.60 per share between January 12 and February 17 following the PSI.
"The surge in the company's stock price indicated that the PSI regarding the construction of the building was published to influence the stock ahead of the withdrawal of the lock-in period," said Md. Abul Kalam, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC).
The PSI was published with the intention to offload shares at inflated prices, he added.
BSEC officials also said the company decided to construct the building, bypassing its core functions to be carried out with IPO funds of Tk 950 million collected in August 2022.
Moreover, the company's Memorandum of Association does not permit such a construction project.
The drugmaker, however, can include the matter in its Memorandum of Association and go ahead with the construction project, said the BSEC spokesperson.
Asiatic Laboratories had raised the IPO fund for business expansion, construction of a factory building, and repayment of bank loans.
It was supposed to complete full utilisation of IPO funds by February 24 this year.
According to a BSEC press release, the company has yet to fully utilise IPO funds.
The auditor's report also said 68 per cent of the IPO funds remained unutilised as of September 2024. The allocation for construction of the factory building was not used at all until that time.
Mr. Kalam expressed skepticism that the drugmaker had decided to build a 32-storied infrastructure while suspending the construction of the factory building.
Meanwhile, an inspection conducted by the Dhaka Stock Exchange (DSE) found that the company unveiled its "highly ambitious" plan without any project evaluation or feasibility study. The company had not even received approval from the city development authority -- Rajdhani Unnayan Kartripakkha (RAJUK).
"We have doubts whether the proposed building will be visible or not. But the PSI regarding the construction and the subsequent price hike of the company's shares will burn the fingers of general investors," said the BSEC spokesperson.
The company's attempt to raise IPO funds had also aroused controversy.
In September 2022, the BSEC allowed Asiatic Lab to raise Tk 950 million by issuing primary shares.
But the regulator suspended IPO subscription in January 2023 following allegations of false land ownership claims, inaccurate financials, and fraudulent share money deposit reports.
A subsequent investigation also found evidence in support of the allegations.
The BSEC then fined each director of Asiatic Lab and the issue manager Tk 5 million. Additionally, the managing director, chief financial officer, and company secretary - who signed the prospectus - were fined Tk 2.5 million each.
The latest punitive action has been recommended by the Dhaka bourse.
The extended lock-in period will be three years or until the completion of the proposed commercial building, whichever is longer.
Preferring anonymity, another BSEC official said sponsors of many other listed companies had the intention to influence stock prices through fake PSI.
"The securities commission's exemplary action against Asiatic Laboratories will keep sponsors of other companies from repeating the misdeed," he added.

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