The strange case of
dost steel
Questions were raised when Dost Steel rallied on the PSC despite consistent losses
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t is hard to see how anyone could find Dost Steels a good investment. If you look at the graph attached with this story, you can see that since listing on the Pakistan Stock Exchange (PSX) in 2007, the company did not produce anything until more than a decade later in 2018 - and then promptly shut down just a year later. It has made a loss every single year since 2007. And in its recently released financial report for the year 2021, it made its third largest loss, at Rs175 million. So you can imagine that the PSX had a few questions when it saw that the share price of Dost Steel nearly doubled in one day. Here’s what happened: On September 1, 2021, the Dost Steel share price was Rs4.93. This had dropped to Rs3.42 by October 13. Then it climbed to Rs3.6 on October 15, and
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then shot to Rs4.29 on October 18. On October 18, both Dost Steels financials, and a Letter of Intent dropped. That letter was from Crescent Star Insurance (CSIL), which said that it had sent a letter of intent on October 15 to a group of shareholders - Jamal Iftikhar, and his seven family members - for the entirety of their 24.97% stake in Dost Steels. This was for Rs7.64 per share, and the offer was valid until October 31st. Crucially, the letter was addressed to Jamal Iftikhar and family, at Dost Steels. On 20 October, Dost Steels sent this letter to the PSX: that the company had been informed by the sponsors (Jamal and his family) that the “LOI sent by CSIL is an unsolicited proposal on its own account, hence the same is not acknowledged by the sponsors of the company”. The sponsors then said that the
unusual share price increase was because of CSIL’s actions. Here is when, CSIL got very annoyed, and decided to produce receipts, as they say, and sent a lengthy letter to the PSX, including a photocopy of a shareholding agreement. Essentially, in 2016, CSIL and the sponsors signed a shareholders agreement whereby Jamal Iftikar and his family members (Jamal is also the CEO of Dost Steel) would own a cumulative 14% of the shares, while CSIL would own 29.83%. According to the latest Dost Steel annual report, they now own 26.6% (that same report does not mention CSIL by name). According to the letter, Jamal Iftikar and his family have been trying to sell their share of Dost Steel (24.975) for the last two years, and even signed a term sheet on two occasions which was not made public. CSIL sent a letter
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