Even with the possible delisting of few companies and suspension of trading of few stocks, market capitalization (M-Cap) has crossed Nu 51B.
M-Cap is the value of shares at prevailing market price. This is derived by multiplying number of existing shares by current market prices, meaning that an increase in either the number or the prices of stock will contribute to M-Cap.
The M-Cap saw an increase of about Nu 20B between 2018 and 2019. However, local economist said the entire worth of the listed companies has not seen such an unprecedented growth within a year.
This has come at a time when the Royal Securities Exchange of Bhutan Limited (RSEBL) has notified the BFAL and BCCL on the possible delisting if the public shareholding of companies are not increased to 25 percent or more. The fate of the three listed mining companies remain uncertain after their lease period expired and could also possibly be delisted.
The Druk Satair Corporation Limited (DSCL) has approved buyback of 25 percent of the total paid up capital by the company from its shareholders at Nu 80 per share in January this year. Likewise, 40 percent of Jigme Mining Corporation Ltd. (JMCL’s) share has been approved for buyback at Nu 200 per share. Jigme Mining Corporation Limited (JMCL) has declared 500 percent dividend in 2018.
A buyback occurs when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors.
Officials from the RSEBL said that the increase in M-Cap is due to the new IPO of Sherza Ventures and also the increase in market price of shares.
In monetary terms, Sherza floated 19M shares amounting to Nu 247M, which has been added to the market capitalization. However further analysis found that certain stocks of companies like Kuensel and Bhutan Tourism Corporation, which stagnated for the last few years has suddenly started to spike. For instance, Kuensel shares did not show any signs of improvement from Nu 12 a share until this year and, as of yesterday it has reached Nu 63. This is not an isolated case.
This could be attributed to the short-supply of shares when the demand is soaring. Earnings per share of the listed companies has not seen much growth, but market value are increasing manifolds and in some cases, overnight.
While the stock exchange has created online platform, increased the trading days and enhanced advocacy programmes, there isn’t much avenues for public investment. The market forces are driving the prices rather than the performance of companies, thus creating an artificial stock price in the market.