The securities regulator has asked the Dhaka bourse to probe into the recent unusual price movement of loss-making company Khan Brothers PP Woven Bag Industries.
The share price of the company that experienced losses for the last four consecutive years jumped 125 per cent in the last three weeks and closed at Tk 176.5 each on the Dhaka Stock Exchange (DSE) on Sunday.
As per the order issued by the Bangladesh Securities and Exchange Commission (BSEC), the DSE will have to look into price manipulation, insider trading, and other abuses, if any, behind the company's price escalation and volumes of shares traded.
A report will have to be submitted to the surveillance department of the BSEC within 30 working days on completion of the inquiry.
The regulator also asked the DSE to make its officers concerned alert to suspicious trade executions in a bid to contain further breach of rules by the company.
Khan Brothers had experienced rallies many times, not supported by its fundamental strength.
The company, which does nothing but subcontracts works, surged an astonishing 975 per cent on the DSE between September 2023 and January 2024.
The stock's rally continued unabated even after the auditor expressed skepticism about the FY23 financial statement, saying the company had overstated assets, sales, and inventories.
Experts then warned general investors, saying any abnormal rally of a junk stock is not sustainable, and that manipulators exit the company offloading overvalued shares to general investors.
They also made a plea of checking the portfolios of the stocks in a bid to find out whether the market operators played a role behind the unbeaten rally of the company.
The auditor also detected discrepancies during a physical examination between FY23 records and the stocks of raw materials and finished goods.
The company showed materials and finished goods worth Tk 597.46 million whereas the auditor found items worth Tk 407 million. The missing stock of items was also not in the bonded warehouse.
The auditor said they were not provided with any copy of the annual audit report submitted by the office of the bond commissioner.
The FY23 financial statement showed revenue of Tk 100.94 million earned by subcontracting works, and that Khan Brothers realised Tk 74.35 million in the year. But the auditor was unable to trace the money since it had been received in cash, not through bank transactions.
The company which was listed in 2014 issued no cash dividend after 2017. It issued a 2 per cent stock dividend for 2018, 2020 and 2022 each.
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