GP makes history but downside remains

As expected, it was more of a 'mar mar cut cut' situation on the debut trading of the Grameenphone (GP) shares on the bourses last Monday.
Most investors, both seasoned and new-entrants, remained glued to computer monitors at home, offices and brokerage houses, watching price movements of the issue that has made history, in terms of its size, investors' response and the single-day boost to the benchmark DGEN.
On the first day of its trading, GP, which mopped up from the market Tk. 4.9 billion through IPO last month and an equivalent amount through per-placement several months back, posted a rise of 1673 per cent to close at Tk 177.30 from its IPO price of Tk 70, including a premium of Tk 60, a share.
Some market experts have described the developments centering the GP issue a good omen for the country's capital market, saying that both sellers and buyers have displayed 'maturity' on their part on the first two days of trading. One expert, who is quoted frequently in the media, has even termed the ruling market price of the GP issue as 'fair for such a large company'.
The euphoria over the GP issue among the investors has been partly because of its size and the very image of the company and partly due to the comments made, from time to time, by top bosses of the relevant organizations and, to some extent, excessive media attention.
The fact remains that high market price of its shares does not mean anything, in terms of financial gains, to a listed company. However, theoretically, the rise and fall in demand is dependent on the performance and dividend payment of the company concerned. An enlightened management does always value the investors' perception about a listed company.
Whether the ruling market price of GP is ' fair' or not only future will decide. What should be important for a long-term investor is the return he or she would be getting from the company on his or her investment at the end of the year in the form dividend. The size of the issue will be pretty important here.
However, investors who are more interested in market gains bother least about dividend income. These days, long-term investors who are choosy and are unwilling to put in their money on stocks of companies with weak fundamentals are rarely seen in the market. For they find the prices of the stocks having strong fundamentals, in most cases, well beyond a rational level.
Apparently, the bourses are not that interested in this type of investors. What they aspire to see is an ever-growing market abuzz with investors making frequent transactions. It matters little to them whether they are fly-by-night investors or not.
Despite the fact that the developments at the share market are no way relevant to the goings-on in other major areas of the economy, most people would heartily welcome the robust growth of the market. There are, however, a few downsides that the management of the bourses would like to downplay. But the Securities and Exchange Commission (SEC) cannot ignore a few unpalatable developments associated with the current growth of the market. For in the event of a debacle, everybody would point finger at the Commission.
There is no denying that all the stakeholders do need to work in unison for the healthy growth of the capital market. But, at times, there surfaces a conflict of interests. For instance, the SEC is mandated to take tough measures for protecting the interest of the investors. But other stakeholders may not like the SEC actions. So, if such stakeholders are allowed to have a finger in every pie, the Commission might find hard to take a tough stand when it is needed most. So, the SEC needs to maintain its independent status and go for what is necessary for a stable growth of the market.
While doing so, the securities regulator should not be at all disturbed by street demonstrations by a handful of so-called investors. Such demonstrations are stage-managed and general investors are no way involved in the same.
As a first step towards straightening up things, the SEC should look into the existence of a large number of fake Beneficiary Owner (BO) accounts. The main reason for investors making long queues for IPO subscription and subsequent high price of new shares is the presence of fake BO accounts. Allegation have it a substantial part of the estimated 2.2 million BO accounts is fake. In the event of detection of such accounts and their cancellation would help remove a few distortions in the market.
There are reasons to be elated by the fact that the market has well absorbed a large issue like the GP. But the market needs some more large issues to dilute the investors' attention to some selected shares. In addition, the SEC should advice the investors to go through the recently published quarterly financial statements of the listed companies while making their investment decisions. That would serve the purpose behind the SEC asking the companies to publish the statements.