Share price of Jute Spinners, a junk stock, is rising 'abnormally' on the Dhaka Stock Exchange (DSE) even though the company has not been in operation for more than six years and suffers a huge loss.
As the company's factory remained shut since 2016, financial indicators of the company are all negative and the company's liabilities have exceeded assets.
In spite of poor performance, Jute Spinners' share price jumped 33 per cent or Tk 51 each in a month to close at Tk 206.10 on Sunday, the first trading day of the week.
Over the past three months, the company's share rose 65 per cent or Tk 81 each although it failed to declare dividends for many years.
A company's stocks are termed 'junk' when its commercial production remains suspended for six months in a row, fails to arrange annual general meetings on time or fails to provide dividends to shareholders.
Jute Spinners incurred a net loss of Tk 55.25 million in nine months for July 2021 to March 2022 as against a loss of Tk 57.51 million in the same period of the previous year.
Jute Spinners has reported a loss of 32.50 per share in nine months for July 2021 to March 2022 as against a loss of Tk 33.83 per share in the same period of the previous year.
The company's liabilities stood at Tk 688.60 million which exceeded its total assets (Tk 289.07 million) by Tk 399.53 million as on June 30, 2021, according to its auditor's report published earlier.
The recent price surge prompted the prime bourse to serve show-cause notice on the company to know whether there was any price sensitive information for recent unusual price hike.
The company, however, in a knee-jerk response, said on Sunday that there is no undisclosed price sensitive information (PSI).
Even after being served show-cause notice, the company's share price did not retreat. Rather, it rose 2.33 per cent further on Sunday.
Jute Spinners' share price surge is unusual in comparison to the current status of the company, said a merchant banker.
"The company's paid-up capital is very low, making it a target for gamblers seeking to manipulate prices higher," he said.
Its paid-up capital stands at Tk 17 million and the total number of securities is 1.70 million.
"By spreading rumours, influential investors try to manipulate the prices of shares of many companies to make a quick profit," the banker said.
Some companies with low performance records also make their way into the top gainers' list frequently, riding on rumours that the investors are putting money in the securities, he added.
He also said the retail investors are chasing these stocks without conducting any proper analysis, as they see continuous rise in values.
"If these stocks face corrections, investors will be the ultimate losers," he said, adding that the investors should be careful about buying junk stocks in order to avert any misfortune.
Senior executives of the company could not be reached over the telephone on the day.
Jute Spinners, listed on the DSE in 1984, failed to declare dividends for many years.
Its sponsor-directors own 39.82 per cent stake in the company while the institutional investors own 23.20 per cent and the general public 36.98 per cent as of July 31, 2022, the DSE data show.
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