Posted the other day: More On Bursa CEO Pay And Lack Of Retail Investor...
Consider the following.
You hear these advice always. Invest and don't punt. Invest long term. The longer you hold the stock, the better your investment return. When the stock falls, just buy more. Same investment is now cheaper, invest more!
Now consider this story.
You read about the company venturing into another country, just when that country is announcing some interesting projects. You get optimistic about the company, right? Analysts are optimistic too.
So you invest in it.
Then came another opportunity.
Company announce a share split plus rights issue.
Rights issue can't be that bad, right? Especially when the company is now having hot new project in another country. Times are exciting and the company 'invites' you to invest more money into the company by subscribing to the rights issue.
So you decided to invest more, more so since you noted that the company was also buying back their own shares.
The company shares meanwhile started to announce weak set of earnings. Stocks started to decline.
7 months after you had subscribed to the rights issue, the stock, due to continued weak earnings, fell to its historical lows. The owners of the company too agree that the stock was cheap. So cheap that they decided to privatise it!
Now get this.
Your cost of shares after the rights issues was 6.25.
The company privatisation offer was a very generous 2.60!!!!!!!
Now seriously you tell me, who in the right mind want to be a retail investor when incidents like this occur? And to add serious salt to your injury, last year, the local business papers suggested the company was planning to relist its shares again!!!!
Isn't this delisting and relisting giving the stock exchange such a horrible stench?
And you know very well, since the stock exchange is a listed entity, it is a business and as a business, the business will most likely allow the relisting because such exercise will generate revenue for the stock exchange.
But at what cost?
You tell me....
So if retail investors shun our stock exchange, can you really blame them?
And oh, this story is real. This incident did happen.
See http://whereiszemoola.blogspot.com/2009/02/big-ouch-for-ioi-properties.html and http://whereiszemoola.blogspot.com/2009/03/ioi-properties.html
This chart says it all...
And this is the link about the possible relisting... http://whereiszemoola.blogspot.com/2012/02/ioi-wants-your-money-again-by-relisting.html
Think about it.
When you see incidents like this happen in our stock exchange, won't it scare away retail investors?
My point again?
Let me paste what I wrote in my last posting.
- Bursa, remind yourself you are a stock exchange. Look after the exchange. Make sure you protect your other customers, the minority shareholders, fairly. That's the most important thing. Who wants to invest when they run the risk of being treated unfairly and not being compensated for taking the risk to invest their hard earned money in shares? Once the protection is there, slowly but surely, the retail investors will flow back into the market.