Riyadh Expats

How To Deal With Companies Running At Loss On The Stock Exchange

Career Others

2018-Apr-06

The stock exchange is one of the feasible investments for the people around the world. People are interested to hold shares of a company via the stock exchange. Those who cannot afford the heavy investment, invest their small savings in the stock exchange in hope to earn healthy profits.

People are hesitant to invest with private investors as they are believed to be crooks. Even though real estate is a viable option to invest, yet not only it requires heavy investment but also people don’t deem real estate investors as truthful people.

So my point here is that investing in joint stock companies is one of the most practical investment. But, most of the people who invest in joint stock companies are not satisfied as many of the companies are running at a loss.

The shareholders have invested in the company’s share yet are not satisfied as the company is running at a loss for years. Even though when the company is established, it had created a hype and people deemed it as a great investment opportunity.

Visitors stand and watch stock movements displayed on large video screens inside the Saudi Stock Exchange, also known as the Tadawul All Share Index in Riyadh, Saudi Arabia, on Monday, Nov.28, 2016. The Tadawul All Share Index advanced 26 percent since Saudi Arabia’s record-breaking bond sale last month, the most in the world during that period. Photographer: Simon Dawson/Bloomberg

I remember a 25 years ago, a company with a positive outlook was established and when it announced to sell its share at the stock exchange, people were overwhelmed. It had a great share price and people expected their investments to reap profits soon.

However, things did not work as per expectations. Even after a decade, the company was not able to make profits and provide anything as dividends to shareholders. Frustrated shareholders, finally decided to change the board of directors.

The destiny of the company did not change with the change of directors. The new board of directors did nothing to pull out the company from the debts. The hope that was lightened with the change of board of directors soon lit out.

The new board of directors even sold the company’s building which was located at a vital city location. Even their last year’s meeting had nothing positive for its shareholders. They only had unapproachable promises and unrealistic approach.

The company at present is having half the losses than its capital. If its losses reach the level of capital, the CMA (Capital Market Authority) would ask them to reduce their capital.

Capital reduction means that each shareholder would have to provide more for holding the share so that the company is not declared bankrupt.

This is what happens when research is not done before establishing a company. Before establishing a company, studies shall be made about the feasibility of the company’s operation.

If the company is planning to sell its share to the public, then there shall be a mechanism where it is checked that the company has done all its research.

The company shall submit a proposal which shall be reviewed and only those companies which have a good research work shall be allowed to go for a stock exchange.

Because the loss-making companies are playing the fool with people. They are playing with the money of people for years and are not providing with any profits to their shareholders. Also, I urge the Saudi real exchange to make necessary amendments in their laws and regulations.

No person shall be allowed to take office for more than three years if he is not being able to provide with profits. There is a board of directors sitting at offices for decades and the company has not been able to earn a single penny of profit.

Source: Saudi Gazette

How To Deal With Companies Running At Loss On The Stock Exchange

How To Deal With Companies Running At Loss On The Stock Exchange

Post Categories

Riyadh Expats