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DPL shares oversubscribed in the rights auction

Despite suffering losses for the sixth consecutive year, the Dungsam Polymer Limited shares in the auction was over subscribed by 7,315 number of shares.

The DPL issued 7,000,000 rights shares to raise Nu 70 million at the face value of Nu 10 per share at the ratio 8:7 (For every 8 shares, 7 rights shares). The subscription opened from October 22 to November 14 this year.

By the end of the subscription period, 668 existing shareholders subscribed a total of 3.8M shares. The remaining 3.15M unsubscribed shares was auctioned in the secondary market.

On the closing date of the rights auction, a total of 25 bidders placed orders for 3.16M shares at multiple pricing starting from Nu 11 to Nu 23 a share.

Rights offer is an issue of shares offered at a special price by a company to its existing shareholders in proportion to their holding of old shares.

Unlike in the past where the company offering rights issue took back the unsubscribed shares, the Royal Securities Exchange of Bhutan (RSEB) has developed new regulation to auction the unsubscribed shares through its online platform. This makes it possible for individuals who don’t own DPL shares to participate.

However, the company can only claim the initial offer price, which is Nu 10 a share. Anything above Nu 10 goes to the existing shareholders who did not subscribe to the rights issue since it culminates into selling their rights to others.

For instance, if an existing DPL shareholder has one share and that person did not subscribe the rights issue, his rights will be put up in the auction. If it is sold at Nu 15 in the auction, Nu 10 will go to the company and this shareholder will get to keep the remaining Nu 5.

This new practice, according to the officials from the RSEB would provide everyone an opportunity to participate in share trading.

Consequently, the total market value of shares in the country has increased from Nu 28B in mid June to Nu 31.29B in August this year, up by over Nu 3B in a period of about two months. This further increased to more than Nu 36 as of yesterday.

This also means that the stocks of 21 listed companies are worth Nu 36B, according to the figures from the Royal Securities Exchange of Bhutan.

With no initial public offerings (IPO), this drastic increase in market capitalisation is attributed to improvement of share trading in the secondary market, especially the rights and bonus issue.

According to RSEB, share trading in the secondary market has increased by about 300 percent in the first five months this year compared with the same period in 2017.

Record show that as of May this year, shares worth Nu 125M was traded in the secondary market. Last five years data (as on May for each year) revealed that there is a huge improvement in transaction pattern in the secondary market.

The improvement in the secondary market could be due to change in the trading process from continuous to call market, which discouraged the negotiated trade as practiced earlier.

Tshering Dorji

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