Colombo Dockyard denies insider activity following unusual share movements

Colombo Dockyard yesterday voiced concern over the recent spike in its share price, calling the activity “unusual and inexplicable” at a time when the company’s financial distress has been well communicated to the market.

In a disclosure to the Colombo Stock Exchange (CSE), responding to concerns raised by the market operator in this regard, the company stated: “We have also noted the unusual trading price movement of the Company’s share in recent times with concern.”

The shipbuilder noted that it has, on multiple occasions, issued updates and statements outlining its dire financial position and ongoing efforts to obtain regulatory approval for a proposed rights issue. The company reiterated that the capital raising, structured as rights in the proportions of nine to two at Rs. 40 per share, is aimed at sustaining its operations and stabilising its balance sheet.

Colombo Dockyard also stressed that the move could trigger a mandatory offer under the Takeovers Code of 1995 should the proposed investor cross the ownership threshold, adding that “purchases of the Company’s shares at unusually and inexplicable prices has taken place despite these disclosures.”

Dismissing speculation of insider developments, the company stressed: “In so far as the Company is concerned, we do not have any undisclosed price sensitive information which could be attributable to the price movement.”

The disclosure went on to note that the firm has already submitted the required documentation to regulators and is awaiting approval. 

It further revealed that Colombo Dockyard has negotiated two potential contracts which can probably be successfully secured if the Company receives regulatory approval for the proposed rights issue.

According to the company, finalising these contracts hinges on its ability to demonstrate financial security. This would be possible only if there is some certainty that the proposed investor will be able to secure the shares of the existing controlling shareholder, it said.