United Mymensingh Power Limited, one of the corporate directors of United Power Generation and Distribution Company, has cancelled its decision to sell two crore shares in UPGDCL to GEM Global Yield Fund after making a public disclosure over the share sales plan.
UMPL and UPGDCL are two concerns of United Group.
UPGDCL, a listed company, on August 6 disseminated a price sensitive information to the Dhaka Stock Exchange that UMPL expressed its intention to sell 1,00,00,000 shares out of its total holding of 43,11,70,994 shares in UPGDCL at the prevailing market price (in the block market) through the stock exchange within 30 working days.
As per rules, the DSE on the same day made the disclosure public.
After the disclosure, share prices of UPGDCL started surging and reached Tk 410 per share on August 22 from Tk 384.2 per share on August 5.
But, share prices of the company continued plummeting since August 23 to settle at Tk 278.4 per share on Sunday as investors found that the sales of the UPGDCL shares were yet to be executed and the delay raised doubts in their mind about the company’s intention regarding the share sales decision to the foreign entity.
DSE officials said that later UPGDCL had informed the bourse that it would not sell the shares.
The DSE has informed the Bangladesh Securities and Exchange Commission about the cancellation of the share sales decision and sought suggestions from the regulator, they said.
United Group officials said that the company (UMPL) did not sell the shares to the foreign entity as the prevailing prices were not favourable and did not match with the company’s business growth.
They also said that the deal was that UMPL would sell two crore shares in UPGDCL in two phases.
BSEC officials said that as per securities rules, the company could not backtrack on the share sales decision after making the information public.
After a director of a listed company announces that he/she will sell or buy shares, the announcement impacts the share prices of the company, they said.
Therefore, a company cannot change its decision, just saying that the current market price is not favourable, they said.
BSEC officials said that the commission might call the company for a hearing and seek explanations about the cancellation of its decision.
If it fails to give appropriate explanations, the commission may take action against the company, they said.
Earlier on March 31 this year, United Group had signed a share purchase agreement with Gem Global Yield Fund LLC SCS to sell UPGDCL shares held by UMPL, and informed the commission about the deal on April 7.
On April 23, the market regulator declined to give approval to the share purchase deal between UMPL and Gem Global on the grounds that the method used for share valuation and trading period was not consistent with the securities rules.
The agreement was to sell 75.07 lakh shares at Tk 476.60 each, way higher than the prevailing market price, through call option, which is prohibited as per rules.
Call option is a financial contract to buy an agreed quantity of a financial instrument from a seller at a certain time for a certain price.
Therefore, the Group under the new deal decided to settle the share sales in the block market of the stock exchanges.
According to the BSEC’s substantial share acquisition rules, if any stake equal or larger than 5 per cent of a listed company’s total shares is to be bought or sold, the parties must apply for prior approval from the securities regulator.
One crore shares are equivalent to less than 2.1 per cent of the total UPGDCL shares.