Why did National Tea’s share price plunge by 60%?

The National Tea Company came as a surprise to many stock traders today when they found that the company's share price plunged by a massive 59.89 per cent.

The stock price of the state-run listed company dropped to Tk 251 today, which was traded at Tk 626 on May 14.

Issuance of new ordinary shares and price adjustment followed by it actually caused the fall, according to the stock brokers.

The company will issue 2.34 crore ordinary shares of Tk 10 each at an issue price of Tk 119.53 each, including a premium of Tk 109.53, for which it received regulatory approval in April this year.

The adjustment was needed as the company was issuing ordinary shares to its existing 66 lakh shareholders to raise a paid-up capital of Tk 279.7 crore.

On May 15, the trading of National Tea's share remained suspended as it was the record date, which is the cut-off date established by a company in order to determine which shareholders are eligible to receive shares or a dividend.

However, National Tea's trading remained halted on May 16 also as the price adjustment was not complete.

Finally, the share price dropped after the completion of the price adjustment.

The purpose of issuance of placement share was to support the business growth (field and factory development), finance the working capital needs along with repayment of bank loan.

Of the 2.34 crore shares, 1.24 crore shares to be issued to the government, Investment Corporation of Bangladesh and Sadharan Bima Corporation.

Some 13.80 lakh shares to be issued to other directors and 95.39 lakh shares the general shareholders

Share subscription will open on July 10 and continue until September 10.