The stock of National Tea Company has been flying high on the Dhaka Stock Exchange (DSE) without any reason for investors to be inclined to bet on its shares.
The Sylhet-based tea producer is suffering losses for more than four years and accumulated losses piled up to Tk 1.44 billion until FY23, owing to rising costs of production for an increase in labour wages and a decline in wholesale tea price in auctions.
The tea producer also incurred a loss of Tk 687 million in the nine months through March this year for the same reasons. Moreover, the company is suffering from a severe working capital shortage.
Despite the grim performance, National Tea's stock continued to soar and jumped 61 per cent in just a month to Tk 486.9 per share on Thursday.
Such an unusual price movement prompted the prime bourse to serve a show-cause notice to the company authority, enquiring about the reasons behind that.
The company gave a usual response on Wednesday, saying there was no undisclosed price-sensitive information for the recent price hike.
Even after the issuance of the show cause notice, the company's share price has not stopped rising and soared 8.73 per cent further on Thursday, becoming the week's top gainer with a 52 per cent escalation.
Market insiders said investors rushed to buy the company's stock in anticipation of quick gains as the company extended one month's subscription of placement shares to September 19.
The company needs the money for its sustainability. Finally, it got permission to collect the money, which will help the company improve its business, said Md Shakil Rizvi, a director of the Dhaka Stock Exchange (DSE).
"This is might be a major reason for investors' putting money in the stock," he added.
After one year of postponement due to legal complexities, National Tea received the High Court's permission in June this year to resume subscription of its placement shares worth Tk 2.80 billion.
Primarily, the subscription period was June 19 to August 19 this year. Later, it got extended by a month.
In April last year, the securities regulator accepted NTC's proposal to raise the said amount by issuing 23.4 million placement shares at Tk 119.53 per share, including a premium of Tk 109.53 each.
The purpose of issuing placement shares is to support business growth, finance working capital needs, and repay bank loans.
Placement shares are new equity shares issued to individual investors, corporate entities, or small groups of investors for fund raising.
As per the regulatory approval, the government and its entities [ICB and Sadharan Bima Corporation] would get shares at a ratio of 4.43:1, meaning 4.43 shares against one existing share.
Non-government sponsor-directors would be able to buy 3.21 shares against every existing share they have. For general shareholders, the ratio has been set at 2.85:1.
The distribution of new shares will increase the government's stake in the company from 42.72 per cent to 51 per cent.
The subscription was supposed to open on July 10 last year, but a general shareholder filed a writ petition with the High Court, challenging the company for not treating all shareholders equally.
The HC gave the final judgment in favour of the company in June this year.
The government had a majority stake in the company until 2002-2003. It lost controlling authority after it sold shares to private entities. Recently, it considered gaining back authority, which will be achieved after the issuance of the new shares.
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