When a large number of shares of a particular company needs to be sold, RSEBL usually does it through a public auction.

The large quantity of RICBL and BNBL shares offloaded by Kidu Fund and Sungchob Fund were auctioned in 2021.

Similarly, in 2023, all the unsubscribed right shares of Druk PNB Bank Ltd were sold through this method.

Did I buy shares through any of those auction events? Is it recommended to buy shares during a public auction?

Unsubscribed right shares of PCAL will be auctioned from 4th – 6th Sept. Should you participate and buy some?

Understand Why It’s in Public Auction

When a particular stock is being auctioned in the market, we must know why it’s being auctioned.

Since a public auction is for a large quantity sale, it is important for us to know reason behind a huge sell-off.

If an institutional investor is selling all or portion of their holdings in that stock, we must know their motive.

When the public auction is to sell unsubscribed right shares, we must be more suspicious and cautious.

If a company is performing well, most existing shareholders would likely keep their right shares.

I Don’t Understand to Participate in it

When it comes to investing, it’s advisable not to proceed unless we really understand the opportunity.

If it is a general trade, I can get the basics, but public auctions of shares, especially in Bhutan stock market, are more challenging for me.

Unless I know ins and outs of it or at least the major aspects, it would be safer for me not to participate.

It’s even more difficult to understand the rationales behind our investors’ investment moves and decisions.

I was surprised to see people quoting Nu. 200+ during the BNBL shares auction when its discovered price was just Nu.33!

Discovered Prices Don’t Seem Natural

When a public auction of shares is carried out, they fix the minimum price known as floor price.

How the floor price is set is never made public. I’m not sure if it’s decided by a committee, shareholders, or the Board.

Shares Become Cheaper Post Auction

During a public auction of BNBL and RICB Shares, their discovered prices were Nu. 33 and Nu.70 respectively.

But they were traded lower for quite an extended period. BNB still trades below that discovered price.

It also happened with DPNBL. The discovered price during the auction of its right shares was Nu.30.10. Later it traded below that price.

I didn’t participate in public auction as buying them at higher prices when they become cheaper later makes less sense.

If someone is investing a lot – I mean in millions – it will make a sense to load during a public auction.

Since such things are likely to happen with the unsubscribed right shares of PCAL as well, I won’t participate in its auction.

What do you think of buying shares in public auction? Is it good for retail investors?  

SUBSCRIBE AND BE A CHEERFUL DONKEY

All my income, savings and investing reports in your Email inbox for FREE

SUBSCRIBE!

You have successful joined Cheerful Donkey Community!