Rock bottom Rs12bn rights issue pricing crashes Sampath Bank (SAMP) shares

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March 1, 2019 (LBO) – Shares on the Colombo Stock Exchange were weaker across the board with Sampath Bank (SAMP) shares having their worst trading day in recent memory.

Two hours into the trading day, shares of SAMP were off close to 16% with just Rs85mn worth of shares traded. The broader market indices were down 1-3% in sympathy.

The drop in SAMP shares has been triggered by a bizarre pricing of a Rs12bn (US$66mn) rights issue. The rights are priced strikingly low at Rs136/share, while the net asset value of the group as of December 31, 2018 was Rs320/share.

The stock dropped close to Rs40 points on the day and is currently trading around Rs195/share.

A stock exchange disclosure said the purpose of the rights issue is to increase Tier 1 capital to comply with Basel III capital requirements.

Non-performing loans have been on the rise across the financial sector in Sri Lanka resulting in increased provisioning across almost all financial institutions.

Large registered finance companies like ETI and The Finance (TFC) have crashed which will eventually lead to the wipeout of hundreds of millions of dollars in consumer deposits.

Analysts for a long time have questioned the quality of regulation of Sri Lanka’s finance companies, however large collapses continue to happen over and over again in the sector.