It is often claimed that the government is very serious in protecting the investors, particularly the small savers. One often reads in the newspapers that the Securities and Exchange Commission of Pakistan (SECP) has taken such steps to save the stock exchange small holdings.
Pakistan Industrial and Commercial Leasing has issued letters of rights to its shareholders. I have been offered to subscribe 300 shares @ Rs 10/- per share. I am a domestic saver.
I have saved a sum of Rs 3000 in some months. I am very serious about investing this amount in some secure security. The government wishes the common man, like me, to come to the Stock Exchange rather than block the money in gold or real estate, which according to economists is of no use to the nation. Now, if I accept this offer, I would need to deposit Rs 3000/-. But at the same time I also know that, a single minute of my depositing the cash with the bank, my investment of Rs 3000 would become net Rs 1500. For the reason that the company's present share market price is Rs 4.95.
The option of course available to me is to buy these 300 shares from the open market at a total of Rs 1500. But what puzzles me is how the authorities gave the companies permission to get further money from the public, in the name of further investment or under the label of raising the capital of the company, at double the cost of the prevailing market price. Do these authorities, like the SECP before, keep in view the performance of such companies whose 50% or more of earlier public investment had already gone down drain.
I am not critical of the company but my question is a logical one. I wonder if wise readers could enlighten the common citizen.