Most of the listed companies, which went public in the last couple of years, have failed to sustain the 'unusually' rising market prices of their shares due to multiple reasons including their 'doubtful' and poor fundamentals.
Market insiders and experts have also held companies' minimum portion of shares for public, unjust speculations and improper allocation of shares among institutions responsible for the situation.
Citing the recent market trend, they said share prices of many listed companies marked significant falls gradually just a couple of months after their debut trading.
Approved by the Bangladesh Securities and Exchange Commission (BSEC), 17 companies were listed with the stock markets in 2014 under the fixed price method.
The companies observed huge public subscription and the market price of some of those soared up to 666 per cent on the day of debut trading.
But after one or two months, the initial market price of the shares was not sustained and it started coming down to their offer prices.
Among the companies, the market prices of two have already gone down below their respective offer prices.
"Abnormal demand of shares is created among general investors as the public portion is very small compared to those of sponsor-directors and institutional investors. As a result, a large number of investors are on scramble to hold the shares of the company," Md. Shakil Rizvi, former president and incumbent director of the Dhaka Stock Exchange (DSE), the premier bourse, told the FE.
Yawer Sayeed, managing director of the AIMS of Bangladesh, said a group of stock brokers and merchant banks create an 'artificial hype' before the companies make their debut trading.
"IPO (initial public offering) hunters also create a hype to offload their shares at high prices. But investors, who purchase shares at secondary market without any justification, become losers," Mr. Sayeed told the FE.
The Khan Brothers PP Woven Bag Industries went public with an offer price of Tk 10 and was traded between Tk 80 and Tk 47 and closed at Tk 76.6, soaring 666 per cent on November 18 last. Due to a declining price trend, on Thursday last the company's market price came down to Tk 34.0.
On November 2 last, the Western Marine Shipyard, which went public with an offer price of Tk 35, made its debut trading and was traded at Tk 63 and rose up to Tk 92 in next four trading days. On Thursday last, the company's shares were traded at Tk 47.40.
The Khulna Printing and Packaging went public with an offer price of Tk 10. On the day of debut trading, the company's market price rose up to Tk 45 and the company's share price went down to Tk 22.80 on Thursday last.
The Far Chemical Industries made its debut trading on July 8 last and the market price rose by 426 per cent from its IPO price of Tk 10 and closed at Tk 52.6. The company's market price is also down and was traded at Tk 30.70 on Thursday last.
Among the companies, the shares of the Peninsula Chittagong and the Far East Knitting and Dyeing Industries went public with an offer price of Tk 30 and Tk 27 respectively.
In June last, the shares of the Peninsula Chittagong were traded at Tk 36.70 on the day of its debut trading and later the price rose to Tk 37.90 in early August.
But afterwards, the company's price trend failed to be sustained and gradually went down below offer price and was traded at Tk 27.7 on Thursday last.
On August 28 last, the Far East Knitting and Dyeing Industries made its debut trading and shares were traded up to Tk 48.50.
Day by day, the company's market price declined and went down below the offer price of Tk 27 on December 10 last and was traded at Tk 26.80. However, the company's market price crossed the offer price at Tk 27.10.
Market insiders said imprudent speculations about healthy returns are also working as a catalyst behind the continuous price hike of the companies like the Shahjibazar Power Company Limited (SPCL) which went public with an offer price of Tk 25.
The SPCL made its debut trading on July 15 last and the company's market price went by 1,255.20 per cent to close at Tk 338.80 on November 18 last. By conducting investigations twice, the securities regulator failed to contain the continuous price hike and sent the SPCL to spot market on November 19 last.
"It's my failure that the shares of the SPCL are not in my portfolio. The company will give huge dividends through the earnings of subsidiaries," said Kamrul Hasan, a general investor who trades at a brokerage house situated in Dilkusha.
Former DSE president Rizvi said another reason behind the abnormal price hike is that the companies give a quarterly disclosure just after debut trading.
"Before the disbursement of refund warrants, the companies get a substantial amount of return from the interest of IPO funds kept in escrow accounts. This interest boosts the EPS (earning per share) disclosed through their quarterly report which creates a hope among investors," Mr Rizvi said.
He said the companies' subsequent quarterly reports do not match with previous one as the income from the interest of IPO funds comes once.
Some stock brokers said imbalanced allocation of shares among institutions is also the reason behind the unjustified price hike.
"Small investors are on one side and manipulators on the other. There is none other than the securities regulator between these two parties to mitigate any abnormal situation," said a top broker on condition of anonymity.
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