The compliance department of the Pakistan Stock Exchange (PSX) has asked five listed companies to explain a “substantial” change in their share prices between March 16 and April 13.
Pakistan Services Ltd (PSEL), which owns and administers the Pearl Continental hotel chain in Pakistan, is one of the five companies. It has a free-float of 60 percent, which means the company’s sponsors control only 40 percent of the company’s shares and the remaining 60 percent are available for public trading.
PSX Head of Listed Companies Compliance Hafiz Maqsood Munshi sent a letter to the company on April 20 stating, “The PSX has observed that the price of PSEL shares has substantially decreased between March 16 and April 13.”
In accordance with the current Securities Act, listed companies are obligated to promptly inform the general public of any anomalous price or volume fluctuations in their traded securities. The company must disclose to the public the specifics of any matter or development that is or may be relevant to the anomalous price or volume movement.
Otherwise, the company should issue a statement indicating that it is unaware of the matter or development in question.
PSEL shares were valued at Rs1,720.50 at the close of trading on March 15. It fell to Rs800.10 per unit by the end of trading on April 13, representing a decrease of 53.5% in less than a month.
The PSX instructed PSEL to provide “immediately” the reason or any pertinent information that may have led to the considerable decrease in its share price during the period under review.
To protect small investors from fraud, capital market regulators around the world keep a watch on any sudden share price fluctuations. They require every publicly traded company to promptly disclose any new information that could have a material impact on its stock price.
The regulatory requirement is intended to prevent insider trading, which is the purchase and sale of shares by a person in possession of non-public, material information about a stock experiencing a significant change in price or trading volume.
The PSX also questioned Tandlianwala Sugar Mills Ltd (TSML), a seller of white crystalline sugar and ethanol with a 5% free-float, regarding the significant increase in its share price between March 16 and April 13.
On March 15 and 16, the TSML share was not traded. On March 17, its closing price was Rs67.03 each. By April 13’s end, the share price had increased by 50.3% to Rs100.79.
Towellers Ltd, a manufacturer and exporter of textile make-ups, garments, and towels, was the third company to receive a letter from the PSX compliance division. Its share price increased by 59.1 percent from Rs183 on March 15 to Rs291.16 on April 13 during the period under review.
The PSX requested an explanation from Khairpur Sugar Mills Ltd, a seller of sugar and by-products with only 5% free-float, as to why its share price rose from Rs46.22 on March 15 to Rs72 on April 13, representing a 55.7pc increase in about a month.
The stock exchange also sought an explanation from Metropolitan Steel Corporation Ltd, a manufacturer of ribbed bars, wire rods, bailing rings, wires, gearbox towers and cold profiles, for its significant share price increase.
The steel manufacturer’s stock was not traded on March 15. On March 16, however, the exchange rate was Rs22.19. Its closing price on April 12 was Rs35 per share, indicating that the stock price increased by 57.7 percent over the period under review. The company’s stock was not transacted on April 13.