Free float of Walton Hi-Tech Industries was 1.49 per cent even six months back. Then by January this year, the number of publicly tradable shares jumped to more than 30 per cent.
The free float increased so quickly, as six sponsor-directors gifted shares to their family members to comply with the regulatory requirement of at least 10 per cent shares available for trading in the equity market.
In the latest development, SM Rezaul Alam, a sponsor director of Walton, transferred 12.12 million shares to his daughter and spouse on Tuesday, the value of which is Tk 5.45 billion at the current market price.
Nearly 90 million shares in total were transferred to non-director family members in the six months.
Though the shares that had been locked-in become tradable, family members have retained those between them.
“We met the regulatory requirement much before the time (in May this year) within the legal framework,” said company secretary Md Rafiqul Islam.
Free-float refers to the shares of a company that are available to the public for trading in the secondary market. Free float exclude shares held by sponsor-directors and government and other locked-in shares.
Mr Islam said the sponsor directors had made the move to avoid negative impacts in the secondary market. “Now, the family members will gradually release their holdings in the market.”
In 2020, the country’s electronics and technology giant listed by floating less than 1 per cent shares in the secondary market, drawing criticism from market analysts.
There are concerns that fewer free float engenders abnormal price rise of stocks when the demand is high.
In the four months after listing, the stock became the second largest firm in terms of market value. Currently, Walton is the fifth largest firm, with a market capitalisation of Tk 148.58 billion.
Amid concerns over inflated stock prices, the Bangladesh Securities and Exchange Commission (BSEC) amended its Public Issue Rules in August 2021, making it mandatory for companies to offload shares worth at least 10 percent of their paid up capital.
In September 2021, the BSEC asked Walton to meet the requirement within a year by offloading stakes of sponsor-directors.
Walton at the time struggled to do so as floor price drove away buyers from the market.
In May 2022, the market regulator extended the time by three years for compliance with the regulatory obligation.
Sponsor-directors explored ways to increase free float but the sale of such a huge number of shares could have an adverse outcome. A sudden supply of shares might have pushed down the share price.
However, market analysts are critical about the way the free float has been increased.
A leading stockbroker, requesting not to be named, said, “Walton technically increased the free float to comply with the regulatory requirement but there is a possibility of share price manipulation in the future as a majority of the shares remained within the family.”
Sponsor-directors of Walton wanted to secure ownership and to make sure the share price does not fall in the equity market, he added.
Moreover, the company will enjoy an annual tax deduction by two and a half per cent for having more than 10 per cent shares in the secondary market. Sponsors themselves also availed of tax benefits by transferring shares, instead of selling in the market.
FINANCIAL PERFORMANCE
Meanwhile, Walton’s profit dropped more than 10 per cent year-on-year to Tk 3.04 billion in the first half of FY25, due to higher production costs and increased finance expenses.
It had a 73 per cent growth in profit in FY24, compared to the year before. Based on the profit growth, the company paid a 350 per cent cash dividend for FY24, the highest since listing in 2020.
STOCK PERFORMANCE
The stock of Walton had been stuck at the floor price of Tk 1047.7 each share for more than 18 months until January last year. After the removal of the floor, the stock plunged to Tk 428 per share within the six months to June last year.
The stock traded between Tk 428.9 per share and Tk 817.6 per share in the last one year. It dropped 0.41 per cent to Tk 488.5 per share on Wednesday on the Dhaka Stock Exchange. https://thefinancialexpress.com.bd/stock/bangladesh/green-deltas-profit-plunge-on-decline-in-premium-income
