Union Insurance shares rocket 300pc sans PSI
The stock price of newly listed Union Insurance Company has kept rising ‘abnormally’ since its trading debut although there is no undisclosed price sensitive information (PSI).In the last 14 trading days since its debut, the non-life insurer saw its share price jump more than 300 per cent or Tk 30.90 each riding on speculation and ‘irrational hype’ among investors.
On Thursday, the company’s share price closed at Tk 40.90 on the Dhaka Stock Exchange (DSE). Its issue price was Tk 10 each.
This ‘abnormal’ price hike prompted the DSE to serve a show-cause notice on the company on February 2.
In response, the insurer, however, informed the DSE on Thursday that there is no undisclosed price sensitive information behind the recent unusual price hike.
The general insurer would make it to the top gainers’ list almost every day since its trading debut on January 16.
Regular circuit-breakers also applied to the newly listed company, meaning the price of share could not rise above 10 per cent or fall below 10 per cent in a single day.
Market analysts said the investors continued to show their appetite for the new issue as short-term speculation created an ‘irrational hype’ among investors since its debut.
Most of the initial public offering (IPO) shareholders were unwilling to sell their stakes hoping for a higher profit in the future, according to a merchant banker.
Each general investor received a minimum 29 IPO shares of Union Insurance against an application of Tk 10,000 each on a pro-rata basis.
However, an analyst said, investors are blindly chasing its stock without conducting any proper analysis, as they see continuous rise in values.
“If this stock faces correction, general investors will be the ultimate losers, which will dent their confidence,” he said.
He pointed out that some influential investors try to manipulate the prices of shares of many companies by spreading rumours.
The investors should be careful about buying overvalued stocks to avoid any misfortune, he said.
Union Insurance raised a fund worth Tk 193.60 million from the capital market by issuing over 19.36 million ordinary shares at an offer price of Tk 10 per share under the fixed price method.
The IPO proceeds will be invested in fixed deposit receipts (FDR), stock market investment, purchase of a floor space and IPO-related expenses.
The company has posted a 59 per cent growth in profit to Tk 42.99 million in nine months from January to September 2021, compared to the same period a year earlier.
The company’s post-IPO earnings per share (EPS) stood at Tk 0.89 for January-September 2021, as against basic EPS of Tk 0.93 for the same period of the previous year.
The company’s authorised capital is Tk 1.0 billion and paid-up capital is Tk 484.02 million while total number of securities is 48.40 million.
Sponsor-directors own 46.54 per cent stake in the company while institutional investors 8.50 per cent and the general public 44.96 per cent as on December 31, 2020 (year-end), the DSE data showed.