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Thursday, March 24, 2011

Riches to rags, WAPO grounded

By Jithendra Antonio

The conversion of Guardian Capital (formerly Watapota:WAPO) rights into ordinary shares yesterday dumfounded investors at the Colombo Stock Exchange, as they were able to witness a more than 75 percent decline in the share price (once, the highest priced share in the bourse).

During early market hours, WAPO share dipped by 50 percent to Rs.700 compared with the closing price of the previous day. The lowest point the share hit during the day was 196, and it closed at Rs.265.

“It was one of the most unusual trading patterns that I ever witnessed at CSE trading floor. WAPO has been a highly speculative share, and I’m sure many investors rather than traders and retailers would got their fingers burned today,” one market analyst told Mirror Business.

The highest ever price recorded for a WAPO share was Rs.100, 012.50.

When rights of WAPO came to trade before the conversion, many retailers were ready to trade the WAPO rights at an exorbitant level of Rs.2000. However the rights then fell to Rs.500 levels on Tuesday March 1, while they closed at Rs.163 levels on Thursday March 3, bringing massive losses to retailers at Colombo.

Guardian Capital is a shell company owned by palm oil-rich Carson Group. The company recently announced a mega 75 for 2 rights issue at Rs. 20, to raise Rs. 503 million to fund equity investments.

In September last year, share price of Watapota zoomed to Rs. 1,900 with at least five different parties vying for its control, despite it being a dud company having liquidated most of its investments and reserves distributed among shareholders.

On the other hand, Guardian Capital Partners PLC has reported only Rs.306,000 profit (46 cents per share) for the 9 months ending 31st December 2010, representing mainly the interest income earned on surplus funds available within the company worth Rs. 20.3 million. The net asset value of the WAPO as at 31st March 2010 amounted to Rs.152.80 per share, out of which Rs.132 was declared as dividends, following shareholder approval at the last Annual General Meeting held in 2010. This resulted in a net asset value of Rs.20.80.

source - www.dailymirror.lk