Himadri on the Dhaka bourse was more than three times costlier than on the Chittagong bourse on Wednesday.
That created an unusual window of opportunity for investors to make quick profits -- just by buying shares of Himadri at a little over Tk 2,000 from the Chittagong Stock Exchange (CSE) and then selling those off two days later at over Tk 6,000 on the Dhaka Stock Exchange (DSE).
In the last four months, the stock escalated 200 times on the DSE while the price multiplied 60 times on the CSE.
"This is a clear case of manipulation. These are negotiated trading," said Mohammad A Hafiz, former president of the Merchant Bankers Association.
While the abnormal price hikes are attributed to gambling, the price gap demands an explanation too.
A stock broker, preferring not to be named, said he believed the company's owners were increasing the stock prices by trading among themselves. They created the price gap so general investors felt tempted to buy shares at a cheaper price from the CSE to sell those on the DSE.
His view on the intention of sponsor-directors can at least be partially established by the data on the share distribution among investors.
Between December 2022 and June this year, the stake of sponsor-directors dropped from 98.5 percent to 65.72 percent while general investors' increased from a mere 0.09 per cent to 32.80 per cent on the DSE.
Similarly, on the port city bourse, sponsor-directors held a 93.04 per cent stake until June 2022, but their stake fell to 65.72 per cent by June this year.
Himadri, which operates six potato cold storages in the northern part of the country, trades on the SME platform of both the exchanges.
A sister concern of Ejab Group, it was listed on OTC (open-the-counter) market of the DSE before being transferred to the exchange's SME board in September 2021. One and a half years later, it was listed on the CSE's SME platform.
Himadri earned only Tk 4 million last year. If Wednesday's closing price on the DSE is taken into consideration, the price-to-earnings (P/E) ratio comes to 1276.
The P/E ratio tells how much investors have paid relative to the company's earnings per share. That means investors paid Tk 1,276 for Tk 1 of Himadri's earnings. The P/E ration is 393 of the stock on the CSE.
The tool itself says the stock is overvalued.
To unravel the mystery behind the sudden elevation of Himadri, the Bangladesh Securities and Exchange Commission (BSEC) asked the DSE to complete an enquiry in 10 working days from August 30.
Though the investigation is supposed to be over by now, BSEC Executive Director Mohammad Rezaul Karim said the DSE was yet to submit a report. DSE Managing Director ATM Tariquzzaman said the probe was still going on.
Himadri has already been accused of manipulating its financial statement for FY22.
The auditor of the company in a qualified opinion posed on the DSE in December last year said the company had overstated its assets.
Because of the steep rise in the stock prices, the company's market value jumped to Tk 5.28 billion on the DSE and to Tk 1.57 billion on the CSE, whereas the paid-up capital is only Tk 7.50 million.
Md. Ashequr Rahman, managing director of Midway Securities, spoke of another possible motive of the sponsor-directors.
He said they had boosted the market capital of the company so they could ask for an oversized loan from banks.
"When a bank will ask for the company's valuation, they [sponsor-directors] will refer to the market value that has been artificially hiked. Then the bank may keep high-priced shares as collateral against a loan to the company."
farhan.fardaus@gmail.com
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