Legacy shares soar despite poor dividend

The price of Legacy Footwear Limited's stock soared around 8 per cent yesterday in spite of its announcement earlier in the day that it was going to give out a minimal amount as dividend.

The company's stock price closed at Tk 62.40 whereas it was Tk 58 on the previous day.

Its Dhaka Stock Exchange (DSE) website disclosure said it was going to give out 1 per cent cash dividend, that too to only general shareholders.

The price rise after the announcement of a minimal dividend is not logical, said a merchant banker, preferring anonymity.

A vested group is spreading rumours that the stock will undergo manipulation, so people rushed to buy it, he said.

So the dividend declared did not come into consideration, he said, adding that general investors should be cautious and refrain from making investments based on rumours.

The company had not declared any dividend in 2019-20 but announced 5 per cent and 20 per cent in the preceding years respectively.

The price of the stock has been volatile in the past two years. It fluctuated between Tk 50 and Tk 86 for rumours, said a stock broker.

The stock was loved by manipulators as it is a small company with a relatively small number of shares, he added.

Legacy Footwear has a paid-up capital of Tk 13 crore alongside 1.30 crore shares, shows the DSE data.

In 2019, the Bangladesh Securities and Exchange Commission (BSEC) decided to fine four investors and their associates Tk 5.10 crore for manipulating shares of Legacy Footwear.

A top BSEC official said they would keep the company in their radar to prevent manipulation.

Investors also should be careful and not buy shares based on rumours, he added.