Major public company raises “serious” concerns about Guyana Stock Exchange trading

Last Updated on Sunday, 28 January 2024, 14:07 by Denis Chabrol

Banks DIH Limited on Saturday voiced a number of concerns about the way the shares of public companies here were being traded on the Guyana Stock Exchange (GSE), saying that its despite developments in the company the share value has not been increasing.

“We are able to develop this company with all this capital works without borrowing and selling shares. That means the value of your shares will increase and that’s why we are concerned seriously about what is going at the Stock Exchange with the level on the value of our shares and we’ll have to take action now, now to solve this problem,” Banks DIH Chairman and Managing Director, Clifford Reis told the company’s 68th Annual General Meeting.

He made known the company’s position after a shareholder expressed satisfaction with his investment and planned to invest more but questioned why doesn’t the share price move in tandem with all the positive things that were happening.

The company announced that it has run out of space at Thirst Park and has purchased 40 acres of land for expansion of its operations, and would be purchasing a new bottling plant for US$71 million. “Your company is so strong financially (that) we are not going to borrow money; we are not going to sell shares to put this plant into operation,” he said.

In contrast to Stock Exchanges in other more developed nations where share prices are influenced by the analysis of plans and projections of companies, the Banks DIH boss described as “amazing” the situation in Guyana where, for instance, last month 80,000 shares were sold between 25 persons, a number of whom had sold 1,000 shares without any hard financial evidence. “I don’t know what is the concept behind it. “It is not a financial concept; that I can tell you. It is not being sold because they look into the stock exchange, they look into the balance sheet and see what is there,” he said. Instead, the leading business executive believed that younger people who had received the shares from their parents were selling them to get cash-in-hand immediately rather than understanding that they are more valuable than cash.

The Banks DIH Chairman recommended that the Securities Council and the GSE establish an odd-lot market where less than 1,000 shares could be traded without affecting the overall share value of companies. He remarked that last month a shareholder sold five shares out of 895 million shares and affected the Stock Exchange by GY$20 . With the by-laws of the company state that five shares cannot be transferred, he questioned how could the brokers have sold five shares to a person. The Board of Directors, he said, could refuse those shares.

While he did not divulge exactly what Banks DIH plans to do remedy the situation, he hinted that his company planned to take certain steps to protect shareholders’ investments in a market where there was no new operational system in place since the GSE was established in 1998.

“Last night, we discussed it at our  board meeting and we’re going to take action, Sir. We have to maybe be the pacesetters, as we are known as, to go forward to have this matter corrected once and for all,” he said. Mr Reis asked why in Guyana there is no investigation or shut down if a share value drops or increases by 10 percent.

In response to a question by another shareholder about why the last trades on the GSE are “always the lowest” based on his constant review, Mr Reis said that was because the Stock Exchange in Guyana publishes and takes into account all securities transaction. “As a result of this practice, a small share transaction can significantly affect the share value of  a particular share as is the case with all companies trading there,” he said.  He said the GSC and the GSE had been informed about that concern in the hope that it would fulfil its mandate of ensuring the the orderly growth and development of a capital market.

Additionally, Mr Reis said Banks DIH has examined the Stock Exchange rules from other territories in the Caribbean and concluded that this issue may be solved by the implementation of an odd-lot market. He explained that the odd-lot market, like what obtains in Barbados, Jamaica, and Trinidad and Tobago, is a separate market where all transactions of may be less than a thousand shares or securities are handled depending on the total share capital of the company. “Those transactions in this market do not affect the share price,” he added.

Banks DIH Limited, he said,  has not seen that recommendation considered or even being implemented.

Mr Reis warned that pension schemes, which are balanced with investments in shares, would suffer a financial hit when the share prices decline due t0 the absence of an odd-lot market, they would have to find money to put back into the pension scheme to meet obligations to pensioners. “A lot of companies which have defined benefits schemes and not defined contribution schemes and are they are doing it with the shares are going to drive some of them up a wall at the end of December,” he said.