United Airways shareholders risk huge loss

Institutional and retail investors of United Airways anticipate huge losses after the airline management suddenly suspended flight operations.

Reazul Basharbdnews24.com
Published : 1 Oct 2014, 03:57 AM
Updated : 1 Oct 2014, 03:57 AM

The airlines raised over Tk 4 billion from the capital market in last four years.

But its share capitalisation dropped to Tk 6.19 billion from Tk 6.7 billion after its chairman resigned and flights were suspended.

The investors now risk huge losses after the company’s share price dropped and nearly touched its face value.

One investor, Mohammad Aslam Hossain, asked how a listed company could suspend or resume flights so suddenly.

“I am in trouble after investing money in United Airways,” he said.

Capital market expert Yawer Sayeed has suggested restructuring the company's board of directors and induction of directors from among the investors for better management of the company assets.

The sponsor-directors of United Airways are holding much less a stake in it than stipulated by the capital market regulator, Bangladesh Securities and Exchange Commission (BSEC).

United Airways authorities on Sept 25 informed that its Chairman and Managing Director Tasbirul Ahmed Chowdhury resigned and a new management was appointed.

The new management stopped its flights immediately after it took charge, citing financial problems.

The decision left passengers booked on its flights in a soup and the investors in great uncertainty over the future of the company.

The panic selling of its shares led to a huge drop in its value from Tk 15 a unit to TK 10.9, just keeping it above the face value of Tk 10 per unit.

After three days, Tasbirul Ahmed Chowdhury returned to assume the position of the managing director again and flights resumed.

But the investors are still worried and do not believe the company is out of the woods.

Meanwhile, the BSEC has formed a committee on Sunday to look into the matters of United Airways.

Commission Executive Director Saifur Rahman said the committee has been asked to submit its report within 21 working days.

According to latest information at Dhaka Stock Exchange (DSE), retail and institutional investors are holding 91.56 percent of the company shares and the sponsors only 8.44 percent.

BSEC stipulates that sponsors should hold at least 30 percent shares of a public listed company collectively and 2 percent individually.

"Why should the company be so dependent on one individual, why should it stop functioning if he is not there," asks Sayeed, the Managing Director of asset management company AIMS of Bangladesh Ltd.

“All the money will be withdrawn by the signature of a single person. Planes will fly in the name of a single person. Is it a grocery shop?”

He said the sponsors had no right to be in the board holding such a small fraction of the total shares. “They have no right to make any critical decision by suspension of flights."