Three stocks have been flying high on the Dhaka Stock Exchange (DSE), prompting the prime bourse to seek explanation from the companies, as their financial results do not look so promising.
Lovello Ice-cream, SBAC Bank, and Esquire Knit Composite saw their stocks jump by 26-59 per cent in a month though there was no undisclosed price sensitive information (PSI).
Lovello Ice-cream's stock soared 59 per cent to Tk 48.60 per share in the month to Tuesday. It was the highest closing price since its listing in the stock market three years back.
The Ice-cream producer with the brand name Lovello went public by raising Tk 300 million under the fixed price method for business expansion.
According to its prospectus, the fund was supposed to be utilised within 24 months on receiving consent from the Bangladesh Securities and Exchange Commission (BSEC).
However, three years have gone by and the company has been able to use the fund partially to procure capital machineries and freezers.
Last month, Lovello proposed extending time for one year until January 2025 for the utilisation of the rest of the IPO fund.
Company secretary (Acting) Kawser Ahmed said they were facing problems opening LCs to import capital machinery within the stipulated time.
About the stock price surge, he said the company did not have any undisclosed price sensitive information, which might influence the share price movements.
The Ice-cream maker's earnings per share dropped to Tk 0.57 for July-December 2023 from Tk 0.73 for the same period a year ago.
Even after a show-cause notice issued to the company, the share price continued to rise 0.41 per cent on Tuesday.
Meanwhile, South Bangla Agriculture and Commerce Bank climbed 39 per cent on the DSE in a month to reach Tk 12.10 on Tuesday.
After remaining stuck on floor at Tk 10.5 per share for more than 16 months, the bank stock plunged to Tk 8.6 per share in a week after the removal of the price restriction. Then the stock began to rise without any reason for investors to be keen on betting on the stock.
In response to a show-cause notice, the bank said on Tuesday that it was not aware of any information that could drive up the stock price.
The bank's profit fell 17 per cent year-on-year to Tk 494 million in the nine months through September last year due to increased provision against loans and advances.
The fourth-generation private commercial bank got listed in the stock market in August 2021 by raising Tk 1 billion under the fixed price method.
Company Secretary Mokaddess Ali could not be reached for comments.
In the same month, Esquire Knit Composite's stock jumped 26 per cent to stand at Tk 29.3 per share on Tuesday despite a year-on-year increase in losses for July-December 2023.
Listed in 2019, Esquire Knit raised Tk 1.50 billion under the book building method for business expansion. But it failed to generate expected revenue and profit due to high borrowing costs.
Despite the price surge, the stock traded 35 per cent lower from the cut-off price of Tk 45 each share. General investors got IPO shares at Tk 40.50 each at a 10 per cent discount on the cut-off price.
Last year, the export-oriented company decided to issue preference shares worth Tk 1 billion in order to expand production capacity and reduce financial costs.
Stock market analysts suspect that manipulation was the reason behind such an "abnormal" price surge.
The regulator does not take any action at the early stage of an unusual rally. On several occasions, inquiry committees were formed but reports never came to light.
General investors keep chasing stocks as they fly on the bourses to make quick gains, a tendency that manipulators cash in on by selling off overvalued stocks to general investors. The Bangladesh Securities and Exchange Commission (BSEC) imposed fines on many wrongdoers but the penalties were not enough to prevent repetition of such events.
"Influential investors by disseminating rumours are trying to manipulate the prices of many companies' shares to make quick profits," said Prof Abu Ahmed, former chairman of the economics department of the University of Dhaka.
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