Market manipulators set to devalue stocks
Market manipulators set to devalue stocks
The last trading sessions on the stock market in Vietnam in 2021 witnessed the old trick of spreading bad news for the purpose of devaluing stocks and buying cheaper shares, which also led to several investors suffering heavy losses.
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Loss to small shareholders
In the trading session on 24 December 2021, many investors dumped PV Power (POW) shares at floor price of VND 17,250 per share. The investors decision resulted from the information that this business was likely to suffer heavy losses in the fourth quarter of 2021. At the meeting with investors the day before, POW representatives said that the pre-tax profit in 2021 was estimated to be nearly VND 2,200 bn, a 24% year-on-year fall. Based on this preliminary estimate, POW would lose about VND 124 bn in the fourth quarter. This would also mean its first loss in a quarter since it was listed on the stock market for the first time in early 2019 at a reference price of VND 14,900 per share.
POW loss in the fourth quarter of 2021 came as a result of maintenance and repair costs and technical problems at the Vung Ang Coal-fired Power Plant in Ha Tinh Province. The technical problems were identified in September 2020 and were expected to be fixed in the third quarter of 2021. The incident caused electricity output from Vung Ang Power Plant to decrease by 63% in October and November 2021. However, soon after this drastic price plunge, investors suddenly received more positive news related to the situation for POW production.
Previously, the company had purchased property insurance and business interruption insurance coverage for the Vung Ang Power Factory 1. POW is currently working with an insurance company, an independent assessment unit, to conduct damage assessment and consider the payment of insurance under the contract. After this positive news was released, POW stock price made a U-turn and rose sharply again in the trading sessions on 25 December 2021 and 4 January 2022 much to the surprise of investors who had earlier dumped their shares in the previous session.
Shareholders of Petroland (PTL) also suffered a serious shock after the company suddenly announced a plan to collect its shareholders’ opinion on voluntary delisting after more than 11 years of trading on the Ho Chi Minh Stock Exchange (HoSE). Many shareholders decided to sell their PTL shares at a price of around VND 10,000 per share because they were worried that the stock would lose liquidity if trading was stopped.
In a later announcement, however, PTL Board of Directors announced a plan to hold an extraordinary General Meeting of Shareholders but did not submit a request for a delisting. What came as a bigger surprise was that PTL Board of Directors also released a plan to increase its capital value to VND 10,000 bn. After this announcement, PTL stock price soared dramatically to nearly VND 19,000 per share, causing huge losses to investors who had sold their shares in November 2021.
Lack of transparency
POW explained that many of its shareholders did not have this information until three months after the Vung Ang incident. One shareholder complained that in the news about the production and business situation the company only provided a few lines of information such as they are assessing the incident situation and taking effective measures to overcome the problem to urgently put Machinery Unit 1 into operation again. The newsletter from the Corporation just showed the results of the output plan and the revenue plan in the months after the incident.
Pursuant to Circular 96/2020/TT-BTC, it is clear that POW seriously violated the regulations on information disclosure for the stock market. Specifically, under Circular 96, companies must disclose information about events and occurrences that greatly affect their production and business activities. When disclosing information about an incident, a public limited company must clearly state the incident, its cause and solutions if they have any.
With reference to PTL, experienced investors do believe that this is an obvious way to force prices down. It is quite easy to look at the unusual transactions of this stock code recently and figure out who could benefit most from this misinformation. For instance, the Phuong Nam Star Real Estate Investment and Services JSC sold nearly 10.7 million PTL shares after three months of ownership. PetroVietnam Construction Corporation (PVX) also sold all of its 36 million PTL shares.
On the other hand, a number of business giants bought tens of millions of shares to become major shareholders of this business. More recently, Mr. Nguyen Tan Thu, Chairman of the Board of Directors, registered to buy 10 million PTL shares. The transaction is expected to be carried out between 31 December 2021 and 28 January 2022 by means of agreement or order matching.
Violations on stock market
Speaking to the press recently, Ms. Ta Thanh Binh, Director of the Market Development Department of the State Securities Commission (SSC), spoke about transparency and sanctions to crack down violations on the stock market. Ms. Binh said that breach of the obligations to provide information have always accounted for the largest number of losses in the market. These acts mainly stem from the fact that market participants have not fully understood the legal provisions, and have not actively observed the legal regulations. Besides, some people in charge have failed to provide relevant internal company information.
Ms. Binh said that SSC has launched 31 investigations, mainly focused on unusual stock transactions. In 2021, SSC issued 471 decisions on fines and is currently working closely with the Ministry of Public Security to handle four cases with signs of criminal violations of stock market manipulation. Additionally, SSC has also conducted a number of inspections into the issuance of individual corporate bonds, and have detected a number of violations by securities companies as well as by investors involved in the individual bonds market.
