Analysis: The right issue that caused KSE crash?

DR ASIM Hussain is alleged to have confessed to his guilt in something which many would think scarcely blends with other of his confessed misdoings. If a report submitted in court by the National Accountability Bureau is to be believed, he sought the assistance of former privatisation minister Syed Naveed Qamar for approval from the Securities and Exchange Commission of Pakistan (SECP) of a right issue worth $170 million for stockbroker Jahangir Siddiqui’s flagship company, Jahangir Siddiqui & Company Limited (JSCL), a couple of years ago.

The report, besides containing so many confessions of Dr Asim, a close aide of former president Asif Ali Zardari, also says that he had arranged a meeting between Mr Siddiqui and Mr Qamar in order to get approval of the right offer from the chief regulator.

Background studies suggest that on April 8, 2008, the JSCL issued right shares to foreign investors at Rs475 in private placement.

The JSCL’s annual published report for the year ended June 30, 2008 gives details of the transaction. “Pursuant to the special resolution passed by the shareholders and with the permission of the SECP, a total of 22,020,000 shares of the company were offered to foreign investors. The shares of Rs10 each were offered at a premium of Rs465 per share [i.e. at a subscription price of Rs475 per share] for total consideration of Rs10,459,500,000 [$157.7m]. The shares were successfully placed and the company issued those to foreign investors under the First Proviso of Section 86(1) of the Companies Ordinance, 1984.”

The JSCL at the time even claimed credit for having done a great job. “This issue of shares to foreign investors and minority shareholders by way of a rights offering is Pakistan’s largest ever equity inflow to date in a private sector company totalling Rs15.5 billion”, directors claimed.....

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