Frankly Speaking: Step up monitoring to curb pump-and-dump schemes

This article first appeared in Forum, The Edge Malaysia Weekly, on June 21, 2021 - June 27, 2021.
Frankly Speaking: Step up monitoring to curb pump-and-dump schemes
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Euro Holdings Bhd seems to be a good example of a pump-and-dump scheme on the local bourse.

From being the best-performing stock last year with a gain of over 4,000% — thanks to the market boom and ample liquidity — the office furniture maker has been on a downtrend since touching its peak of RM5.76 on Jan 15.

The investing fraternity was perplexed by the sudden heavy selling pressure on Euro shares last week, which caused the counter to hit limit down for two straight days on Tuesday and Wednesday. Some 57.5%, or RM1.31 billion in market value, was wiped off over the week based on the last traded price of RM1.10 last Friday.

Industry observers have been uneasy over the spike in Euro shares, which was not well supported by its financials. Although it has returned to the black under the leadership of the new management team, its valuations remain unjustified.

Owing to the recent sharp fall in its share price, it is understandable why Euro has scrapped its proposed four-for-one bonus issue, which was intended to reward its shareholders.

Had it not been terminated, this would have been the second bonus issue undertaken by Euro in less than six months. Its first two-for-one bonus issue was proposed last October and helped push its share price to an all-time-high in January this year.

Its largest shareholder SPA Furniture (M) Sdn Bhd, which owns a 63.55% stake, has reiterated that it has not disposed of any shares in recent months. So, who has been selling the shares?

Perhaps, in the first place, regulators should look into the transactions in Euro shares when they started to draw investor interest last year. Were the shares being manipulated by certain parties?

While retail participation on the local bourse has eased, there has been renewed interest in small-cap stocks, with three companies — Innity Corp Bhd, JcbNext Bhd and Edaran Bhd — hitting limit up last week.

Enhanced monitoring should be carried out sooner rather later to prevent more pump-and-dump activities in the market.

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