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The securities regulator has rejected the proposal of Daffodil Computers to issue 46.7 million shares for the purpose of converting a loan into equity, taken from a concern of the common business group.
The listed company disclosed the regulatory decision through a filing on Monday on the Dhaka Stock Exchange (DSE).
Earlier in December last year, the company informed its board's decision to issue 46.7 million shares at a price of Tk 10 each to convert a loan received from Creative International, a concern of the Daffodil Family.
Md. Abul Kalam, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the company wanted to take away a substantial amount of funds from the listed company on the pretext of converting the loan into equity.
The shares of Daffodil Computers are traded at above Tk 50 each, but common owners of the two companies would have received shares at Tk 10 each only had the proposal been accepted.
The loan could be settled by issuing one-fifth of the proposed shares at market prices, said Mr Kalam.
"If the proposal were approved by the regulator, the owners would have gained five times the loan amount." On the other hand, investors' profit would have been diluted.
The company secretary of Daffodil Computers, Md. Monir Hossain said that although the two companies are the entities of the same business family, Creative International is a separate company.
He, however, said there is a common director in the companies.
Earlier, experts and investors warned against the issuance of shares. While both the organisations belong to the Daffodil Family, Daffodil Computers has free float shares in the hands of general people.
Experts said the deal, if approved by the regulator, would benefit the common ownership, leaving general shareholders to bear the impact of earnings dilution.
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