National Tubes’ undistributed bonus shares raised more questions than answered

The state-run listed company National Tubes on Sunday transferred 42 per cent of its outstanding shares to the account of Capital Market Stabilisation Fund (CMSF).

These shares had been issued in stock dividends and remained undistributed since 2007.

The sheer amount of stock dividends makes little sense considering the losses that the company made for the five years to 2022. It reported profits only for 2020 and 2021 since 2018 but the accumulated loss far outstripped the profits gained.

It issued 10 per cent stock dividends annually between 2014 and 2019, increasing its paid-up capital.

"Giving stock dividend has the same accounting impact as retaining cash on balance sheet. We can thus conclude that the company has reinvested capital in its own business," said Asif Khan, chairman of EDGE Asset Management.

But from the last five years' business performance, he said "it looks like the company has been incurring losses. That means the capital reinvested in the business has not created value."

The bonus shares could not be distributed to the investors, who were entitled, because they had their shares in paper form.

Of the 14.56 million undistributed bonus shares, the government was supposed to receive 14 million shares, while general investors were to get 0.56 million shares, company sources said.

A senior CMSF official said the organisation had received the shares but not the list of investors.

"After getting the investors' list, we will be able to know who the claimants are of the shares," he said.

On the prolonged delay in distributing the bonus shares, company secretary Pranjit Paul said the bonus shares of general investors could not be transferred as they had not converted their holdings into electronic form.

And the government's bonus shares remained undistributed in the absence of any direction from the Bangladesh Steel and Engineering Corporation, the owning corporation of National Tubes.

The shares of the Corporation are also in paper form.

"We have transferred the shares to the account of the CMSF as instructed by the securities regulator," Mr. Paul added.

The settlement of the undistributed dividends will be executed by the CMSF.

National Tubes has also transferred cash dividends worth around Tk 5 million to the CMSF.

The securities regulator formed the CMSF by issuing rules through a gazette notification in June 2021. The objective of the CMSF is to support the country's stock market alongside settling investors' claims of undistributed or unsettled dividends.

On receipt of undistributed cash and stock dividends, the CMSF settles claims based on evidence.

National Tubes issued hefty amounts of stock dividends between 2004 and 2011 too.

It issued 40 per cent stocks in 2004, 33 per cent in 2005, 30 per cent in 2007, 50 per cent in 2008, 10 per cent in 2009 and 20 per cent in 2011.

The number of the company's outstanding shares rose to more than 34.82 million.

The amount of bonus shares transferred to the CMSF account indicates that a substantial amount of stock dividends had remained undistributed year after year.

The value of these shares stands at Tk 1.16 billion as per the Sunday's market price of Tk 79.60 per share.

[email protected]