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Environmental Resources and some other stocks under
examination SEC looking "very carefully’’ at volatile share prices

The Securities and Exchange Commission (SEC) is looking very carefully at the share price movements of certain stocks including Environmental Resources (ERI), previous Walker & Greig, whose price escalated astonishingly on the Colombo bourse in recent days.

"We are very concerned," senior SEC sources said yesterday. "High volatility is a serious concern and we are looking at it very carefully."

He said that ERI was not the only share on which the market watchdog’s attention was centered. There are some other stocks too whose sharp share price movements were being carefully examined.

ERI, priced at Rs.42.50 per share in early December had hit a high of Rs.268 on Wednesday when it closed at Rs.238.50, losing Rs.25.25 of its Tuesday’s closing price of Rs.263.75.

"I can’t remember a share moving this way without the impetus of something like a big bonus issue," an experienced stockbroker said.

Analysts said that in market capitalization terms ERI was among the most valuable companies quoted on the CSE ranking alongside blue chips like Aitken Spence and Distilleries.

The company last week had a market capitalization of Rs.33 billion on its ordinary shares, analysts said.

ERI also has two classes of warrants convertible this year to ordinary shares at Rs.22 and next year at Rs.24. Both warrants too moved in recent days as dizzily as the counter itself.

Analysts said that ERI began to move up after it declared a rights issue of one new share for two existing shares subject to shareholder and regulatory approval.

ERI which has said that it is buying into a British Virgin Islands firm with mining interests recently bought a stock broking license from HNB Stock Brokers following HNB and DFCC Bank entering into a joint venture, Acuity Partners, which has its own stockbroking business.

The joint venture, using the previous DFCC Stockbrokers licence, now functions as Acutiy Stockbrokers.

ERI bought Walker & Greig from Brown & Company early last year transferring its business, assets and liabilities to the quoted company now listed on the CSE as Environment Resources Investments.

Last November ERI acquired 29% of Ceylon Leather Products investing Rs.55 per share for over 3.6 million shares of that company in which its parent, Lionheart Investments, had a 24% stake. Thereafter the Rs.55 price was offered to minority shareholders of Ceylon Leather under the SEC’s Mergers and Acquisitions rule.

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