An inspection team of the Dhaka Stock Exchange (DSE) found Northern Jute Manufacturing Company shut in a recent visit and disclosed the information to investors through its website repeatedly.
They went to the place where the company is located in Kushtia in early September to examine its operational status but could not enter the factory premises. Neither did the team find the address of Northern Jute's head office in Dhaka. The company no longer has any website.
While all the signs of warning were glaring at investors, Northern Jute stock traded at elevated prices even surpassing Tk 200 each share on September 27 this year, higher than two-thirds of blue-chip stocks.
Similar was the case with four other companies -- Familytex (BD), Dulamia Cotton Spinning Mills, Regent Textiles Mills, and the state-run Usmania Glass Sheet Factory.
The inspection team found the factories of these companies shut too. It even discovered on Monday that the head office of Familytex was being used by another organisation.
The regulatory drive is to continue to reveal the business performance of 37 more companies that the bourse suspected of hiding actual financial data. The companies are under scrutiny for issues of non-compliance, including non-payment of dividends for years and withholding of annual general meetings.
Representatives of the regulatory bodies said many of the 42 companies had become non-compliant soon after their listing in the market.
However, some of these companies have been flying high on the bourses, raising questions.
For example, loss-making Central Pharmaceuticals soared 9.91 per cent as the week began, becoming the day's top gainer, without any valid reason for investors to be inclined to bet on the stock.
The drug maker's losses piled up to Tk 1.18 billion in the three years to FY22, while the company incurred a loss of Tk 23 million in the nine months through March this year.
Another stock, Khan Brother PP Woven Bag Industries jumped 45 per cent in just two weeks until October 3 despite the company being on the inspection list. After two days' fall, the stock again climbed 9.72 per cent on Tuesday to Tk 27.10.
Khan Brother has been facing a severe working capital shortage that forced the company to subcontract orders. It has been in the red for three financial years.
Usmania Glass has traded at above Tk 50 each share in the last few months though its earnings have been in the negative for more than five years.
Of the 14 companies that the DSE is to inspect in the first phase, eight were listed after the stock market debacle in 2010.
"A hike in the share price is unusual considering the current status of these companies," said Minhaz Mannan Emon, former director of the DSE.
"Without manipulation, such kind of price escalation is not possible," said Mr Emon, also managing director of BLI Securities.
Dr ATM Tariquzzaman, managing director of the DSE, said that after the completion of the drive, the bourse would seek direction from the stock market regulator regarding the next course of action.
The companies may have been closed for logical reasons, said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka. In most cases, the company went into bad shape due to irregularities and money embezzlement by owners.
"The owners of the companies that closed after irregularities must be brought to justice," said Prof Ahmed, otherwise, such incidents would repeat and investors would be the ultimate losers.
The regulator should take an initiative to delist these companies, he added.
In the meantime, the burden of losses has been shifted to retail investors.
For an instance, sponsor-directors of Northern Jute sold out a majority of their stake to retail investors. Now, they jointly hold 15.09 per cent stake in the company, which is half the regulatory requirement, whereas the public hold the rest.
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