The stock price of newly listed Meghna Insurance Company is rising 'abnormally' since debut on June 8 this year as it created an 'irrational hype' among investors.
Within the three weeks since its debut, the company's share price soared four-time high or Tk 39.30 each from its issue price of Tk 10 riding on short-term speculation.
The general insurer's share price closed at Tk 49.30 on Thursday on the Dhaka Stock Exchange. It was also the day's top gainer, rising 9.80 per cent further on Thursday.
The company's share price is soaring despite the company's nine months profit after tax fell 52.66 per cent to Tk 27.05 million for January-September 2021, down from profit after tax of Tk 57.14 million in the same period a year before.
Market insiders said the investors continued to show their appetite for the new issue amid short-term speculation. So, it 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 higher profit in future, according to a merchant banker.
The investors are buying the stock without conducting a proper analysis when they see the rise in values every day, he said.
"Investors rush to buy its shares, although the number of shares traded is quite low, even then, prices continue to rise as demand builds," he said.
The company was featured in the top gainers' list almost every day since its trading debut on June 8.
The investors should be careful about buying overvalued stocks in order to avert any misfortune, he said.
Meghna Insurance raised Tk 160 million from the capital market under the fixed price method for investment in fixed deposits, investment in the capital market, investment in treasury bond, along with catering the IPO expenses.
The company's nine months profit after tax fell 52.66 per cent to Tk 27.05 million.
The company's nine months basic earnings per share (EPS) stood at Tk 1.29 for January-September 2021, as against basic EPS of Tk 7.20 in the same period of the previous year.
However, post-IPO EPS would be Tk 0.68 for the nine months period that ended on 30 September 2021. The company's post-IPO net asset value (NAV) per share was Tk 14.36.
The company's authorised capital is Tk 1.0 billion and paid-up capital is Tk 400 million while total number of securities is 40 million.
Sponsor-directors own 30.28 per cent stake in the company while institutional investors 24.93 per cent and the general public 44.79 per cent as on December 31, 2020 (year-end), the DSE data showed.
Currently, 54 insurance companies -- life and non-life -- are listed on the capital market.