PSX asks companies to explain significant changes in share prices

The compliance department of the Pakistan Stock Exchange (PSX) has contacted five listed companies seeking clarification on a “substantial” change in their share prices between March 16 and April 13. One of the companies contacted is Pakistan Services Ltd (PSEL), which owns and manages the chain of Pearl Continental hotels in Pakistan. PSEL has a free-float of 60 per cent, with the company’s sponsors controlling only 40 per cent of the shareholding while the rest is available to the public for trading.

PSX Head of Listed Companies Compliance, Hafiz Maqsood Munshi, sent a letter to PSEL on April 20 stating that “The PSX has observed that the price in the shares of PSEL has decreased substantially during the period from March 16 and April 13”. According to the prevailing Securities Act, listed companies are required to promptly disclose any unusual movement in the price or volume of its traded securities to the general public. If the company observes any such matter or development, it must share the details with the public. Otherwise, the company should issue a statement of the fact that it’s not aware of any such matter or development.

The share price of PSEL was Rs1,720.50 at the close of the March 15 session, dropping to Rs800.10 apiece by the end of the April 13 session, showing a decrease of 53.5 per cent in less than a month. The PSX has directed PSEL to provide, “at the earliest”, the reason or any material information that may have resulted in the substantial decrease in its price during the period under consideration.

Capital market regulators across the world keep an eye on any sudden share price movements to protect small investors from fraud. Listed companies are required to share any new development that may have a material impact on its stock price with the public immediately. This regulatory requirement is aimed at preventing insider trading, which involves buying and selling of shares by someone with non-public but material information about the stock undergoing a sharp change in its price or trading volume.

The PSX also contacted Tandlianwala Sugar Mills Ltd (TSML), a producer and seller of white crystalline sugar and ethanol with a free-float of only 5 per cent, to explain the substantial increase in its share price between March 16 and April 13. TSML had no trading on March 15 or 16, with a closing price of Rs67.03 apiece on March 17. Its share price rose 50.3 per cent to Rs100.79 a share by the end of April 13.

According to Dawn, the PSX compliance department contacted Towellers Ltd, a manufacturer and exporter of textile make-ups, garments and towels, which saw its share price rise from Rs183 on March 15 to Rs291.16 on April 13, up 59.1 per cent in the period under review. The PSX asked Khairpur Sugar Mills Ltd, a seller of sugar and by-products with just 5 per cent of free-float, to explain why its share price rose from Rs46.22 on March 15 to Rs72 on April 13, reflecting an increase of 55.7 per cent in about a month.

Lastly, the stock exchange sought an explanation for the substantial share price increase from Metropolitan Steel Corporation Ltd, which makes ribbed bars, wire rods, bailing hoops, wires, transmission towers and cold profiles. The steel maker’s share had no trading on March 15, with a closing rate of Rs22.19 on March 16. Its closing rate on April 12 was Rs35 apiece, which shows the increase in the stock rate was 57.7 per cent over the period under review. The shares of the company were not traded on April 13.