GASCI rebuts Reis share price manoeuvring charge
Stabroek News
March 25, 2004
There is no evidence to suggest that anyone is trying to manipulate the price of Banks DIH Limited's shares, the Guyana Association of Securities Companies and Intermediaries Inc (GASCI) says.
This was in response to comments made by Managing- Director of Banks DIH Limited Clifford Reis during his company's annual general meeting in Berbice.
Reis said that he was concerned about persons who were involved in trying to manoeuvre the price of the company's shares. Banks' shares usually see activity at almost every trading session of the stock exchange.
GASCI explained that the price of the share is determined when buyers and sellers agree on the price and a trade is executed. It added that if the supply of a share on offer was consistently exceeding the demand, investors wishing to sell shares would need to reduce their price in order to obtain priority.
GASCI made the point that since trading began on the stock exchange, there has always been an excess of orders to sell Banks shares on the books at the end of the session.
GASCI said in a release yesterday that it takes a keen interest when suggestions or allegations of market-rigging are made.
According to the table (below), $27.8M worth of Banks DIH Limited shares were on offer as of Session 38, which was Monday. The order that currently has the highest priority is in bold: 112,044 shares at $5.90. GASCI said that in the absence of any order to sell at a lower price, anyone wishing to buy must deal first against this order, which would result in a trade at $5.90.
In response to Reis's statement that some people put the Banks DIH Limited shares at $6.00 each when the balance sheet says it is $10.00, GASCI said that the $10.31 quoted (sometimes referred to as the net asset value or the shareholders equity per share) represents the book value based on the company's accounts. "The valuation of assets in the accounts is based on a going concern basis which may not be realised if the company were to wind up, the assets liquidated and the creditors paid," GASCI said. "The value quoted also does not take into consideration the subsequent 5:4 bonus issue." (Banks gave shareholders one extra share for every four they held.)
GASCI said also that the price-earnings ratio and the dividend-yield for Banks shares are ranked within those of all shares being traded as can be seen in the table above/below.
The Guyana Securities Council (GSC) is responsible for enforcement of the Securities Industry Act of 1998. Section 72 of that act deals with market-rigging and states: "No person shall, directly, or indirectly, effect a series of transactions in any security on any securities market thereby creating actual or apparent active trading in such security for the purpose of inducing the purchase or sale of such security by others." Anyone who knowingly or recklessly contravenes this provision can be fined $150,000 or imprisoned for one year.
GASCI said that it has rules, systems and procedures that would ensure that trading is conducted in an orderly, fair and equitable manner. "GASCI operates on a consolidated limit order book, on which all outstanding orders to buy or sell securities are maintained."
Trading on the exchange is carried out by execution against the orders on the book. Orders must be filled by time and price, so the order to sell that was entered first at the lowest price must be filled first. "Supply and demand for the stock determine the price at which trades take place and if there are more sellers than buyers they must undercut those orders which have priority in order to sell the stock to a limited number of buyers," GASCI's release said.
It added "GASCI subscribes to rules, systems and procedures which ensure that trading is conducted in an orderly, fair, transparent and equitable manner. Therefore, any suggestion or allegation of market rigging is unwarranted and false".