Hotel Developers, Pelwatte small shareholders get raw deal

Questions are being raised on the unfair treatment meted out to small shareholders in Hotel Developers PLC (HDP) and Pelwatte Sugar Industries PLC (Pelwatte) during the progress of the expropriation bill as trading in these stocks were permitted days after the news hit the market, without being suspended by the Colombo Stock Exchange (CSE), corporate lawyers said.

“The fact that the Treasury took over these firms or they intended to was price sensitive information. It wasn’t disclosed for sometime by both these firms. Those owning the public float or the minority shareholders’ interests weren’t looked after in this situation, as they were holding the shares and were in the dark for a long time. Such a precedence doesn’t augur well for the share market, which has already taken a beating,” a corporate lawyer told the Business Times.

Pelwatte was the first to issue a statement to the CSE on November 4 saying that their rights issue would be delayed until the outcome of the bill. On November 9 the company said that ‘at this moment we are unable to comment on the implications of the Bill as we await instructions by the Secretary to the Treasury.’

On November 14, HDP announced that its assets are now with the government and that ‘all’ the shares are now held by the Treasury Secretary followed by another statement the next day cancelling its AGM and EGM due on November 21.

With so many announcements, analysts point out that trading in both these firms was cancelled only on Tuesday, November 15, which was a late move by the CSE. “The CSE should’ve acted promptly and halted trading,” the lawyer said, adding that whatever the shares that were held by one party shouldn’t have been passed to another party when there was a controversial Bill looming.

“We affected a trading halt on these companies on November 11 and changed the status to ‘trading suspended’ a few days later, on the 15th,” Surekha Sellahewa, CEO CSE told the Business Times, defending its position. Pelwatte has some 20% in the public float and HDP has 8% in the public float.