PSX jumps the gun on Chakwal Spinning’s rebirth as a cloud computing company

In a perfectly functioning capital market, it is the role of the exchange to be the first regulatory body which looks out for the little guy. Investor confidence is built on the fact that when they take an investment decision, it will be protected and looked after by the regulator who calls the balls and strikes as it sees them. In the context of Pakistan, it seems that the exchange has a lax view. The latest case of this is Chakwal Spinning Mills. 

Usually it is seen that the market is left to function unhindered in order to allow the demand and supply to lead to price discovery. An unfettered market is supposed to allow for the market to function smoothly with little uncertainty and interruption. In the case of Chakwal, the exchange was not able to force the company to follow the applicable regulations and then even contributed to the mess in the end. This is the story of how the exchange forgot to apply its own regulations properly while jumping the gun and then having egg on its face. While the exchange looks to save some grace, the cost of this fiasco is still weighing on the exchange as the investors are seeing their investment crumbling in front of their eyes.

To comprehend what has happened here, there is a need to step back one year into time. In November of 2023, Chakwal was a company which had not been operating for almost 6 years. Way back in 2017, the company had stopped manufacturing and had leased out its premises to Yousuf Weaving Mills Ltd. The company was sustaining losses and was accumulating them on its accounts. Due to its rising liabilities, the banks were knocking the doors of the courts in order to recover their outstanding dues. The situation had gotten so bad that the auditors felt that the company could not sustain itself and it was no longer a going concern.