How Paper Processing and Monospool’s paid-up capital tripled overnight

Magura Group's two paper companies – Paper Processing & Packaging Limited, and Bangladesh Monospool Paper Manufacturing – which returned to exchange trading from the over-the-counter (OTC) market of the Dhaka Stock Exchange in June are the talks of the street again.

After 5-12 times stock price hikes in less than three months, regulatory moves to look into the matters, and later, the falling stock prices, nothing was more insane than the latest development regarding their number of shares and the paid-up capital.

Last week, both companies' shares tripled overnight. Investors were saddened to learn it from the website of the Dhaka Stock Exchange (DSE).

Earlier last week the DSE website was showing that Paper Processing's paid-up capital was Tk3.36 crore which jumped to Tk10.45 crore at the end of the week and there neither had been any explanation of it nor any announcement of a number of shares increased.

A similar case was observed in Monospool too. Its paid-up capital increased to Tk9.39 crore from Tk3.05 crore.

And that sparked a free fall in the Paper Processing and Monospool shares since the first hour of the Sunday session as investors feared that the companies' earnings and asset per share might drop to one-third because of the abnormal rise in a number of shares.

Iqbal, a retail investor, told The Business Standard on Sunday, "It is unacceptable. How a company can triple its shares without any announcement of new share disbursement!"

"Also, how the stock exchange could upload such a drastic change without any explanation!" he expressed his anger on a Motijheel trading floor.

Of course, investors do not deserve such confusing information, the investor added.

What happened?

When contacted, Mustafizur Rahman, company secretary of the firms, said both the companies announced 200% stock dividends for the fiscal year 2017-2018, alongside some in other years, to increase their paid-up capital.

Since the firms were in the OTC market, the stock dividends were subject to regulatory approval and the companies did not get it in the next two years.

They secured the Bangladesh Securities and Exchange Commission's (BSEC) approval to issue and disburse the bonus shares for 2018 in February this year when the regulator also approved their relisting plan.

Mustafizur Rahman also said the companies disbursed the bonus shares with the bourses' approval just before they reentered the main platform in June.

The companies prepared and submitted the July 2020-March 2021 unaudited financial statements based on the increased number of shares and that is why the investors should stop fearing earnings and asset dilution.

Then, why the DSE kept publishing the old numbers of total shares?

DSE Managing Director Tarique Amin Bhuiyan did not respond to The Business Standard's phone call and SMS on Monday.

However, a colleague of him said the DSE publishes information regarding paid-up capital and number of shares based on the latest audited financial statement, and since the two companies' latest reports did not contain any information regarding the increase in a number of shares and the paid-up capital, the updated information was initially missing on the DSE website.

Later, the DSE officials concerned noticed the change in the companies' latest submission of shareholding details and corrected the information.

Seeking anonymity, he said all the parties should have been more careful to handle such sensitive information.

"This is a rare case and it was a mistake," he added.

The 2020-21 fiscal year's unaudited figures should not drop further as the companies submitted the already diluted figures and the DSE uploaded the same, he added echoing the firms' Company Secretary Mustafizur Rahman.

On Monday, Paper Processing's shares closed at Tk187.8 which shot up to Tk246 seven days ago.

Monospool's shares closed at Tk191.2 which went up to Tk249.8 on 8 September.

Both the stocks were down up to the allowable limit for a single session over Sunday and Monday.