A seemingly simple arithmetic error has landed the Treet Corporation in trouble with investors and possibly the subject of an investigation by the Securities and Exchange Commission of Pakistan (SECP).
Treet announced its financial results early in the afternoon of the 30th of September. After posting a loss of Rs 11 crore the previous year, the company had managed to make Rs 1 billion profit this year. The excitement was compounded when the earnings per share were listed in the document as Rs 4.8 — up from Rs -0.49 the previous year.
The results caused a bit of a rally. Treet’s share price, which had been trading at Rs 29.8 before the results were announced, began to move upwards. It eventually touched a high of Rs 32.65. The stock was trading near its upper lock which means that it had seen a price increase of 10% and could not go any higher than that for the day.
Investors that had Treet in their portfolios were buoyed. The improvement in year-on-year performance had increased interest in the stock. The price of the stock closed at Rs 31.85 and there was a feeling more investors would gravitate towards Treet stocks when the markets opened today (Wednesday October 1st).
That never happened. Before the markets opened the next day, Treet put up an announcement on the Pakistan Stock Exchange. They had been mistaken. The earnings per share rate of Rs 4.8 was a miscalculation. The actual number was Rs 2.82.
The mistake was significant enough that after Treet made the revision, the share price fell back to the levels it was at before the results had been announced on September the 30th. The company was trading at Rs 29.8 before the announcement and fell back to the same levels after the correction was made.
Caught in the lurch were investors who had bought shares in Treet on the basis of their mistaken results. Once the revision was made, they would have seen immediate loss in their investment due to a calculation error made by someone at the company.
As a result, the SECP has received multiple complaints about the error. Reports from within the SECP claim the commission has begun collecting data to determine what to do next. No formal investigation has been launched yet, and it is expected for the SECP to track and look into any unusual changes in stock price.
But questions remain. How did the mistake come about? Is there any remedy for investors that were misled by the announcement? And is a company liable for misrepresentation even when it claims it was an honest mistake?
The sequence of events
The mistake seems quite simple. Treet had scheduled a meeting for 2PM UAE time on the 30th of September to announce their results. The meeting was being held in Dubai.
The next morning, the meeting was brought forward to 11 30 AM UAE time. There had already been some excitement surrounding the announcement since investors were expecting improved results from the previous year.
Less than 45 minutes after the start of the meeting, the results were announced. At 1:10 PM Pakistan time, it was announced that the company had ended up making a profit of Rs 1 billion. This was a huge turnaround from the loss made last year of almost Rs 11 crores. The earning per share had gone from -0.49 per share to Rs 4.8 per share in 2025.
The market rallied and the stock price began trading near its upper lock. But someone at Treet eventually realised they had made a mistake. Sometime between 3 30PM on the 30th of September and 8AM on the 1st of October, Treet sent a new notification to the stock exchange.
We do not know the exact time that the new notification was sent. While the responsibility to make all material announcements rests with individual companies, the PSX has developed a system called PUCARS (Pakistan Unified Corporate Action Reporting System) which allows the company to report their corporate announcements directly to the exchange.
In the past, physical notifications had to be sent by the company to the exchange on their official stationery which would then be forwarded by the exchange to the investing public. PUCARS was developed to cut down on the time it took to disseminate this information and would make the announcements in a swift manner. This system shuts down after 3:30 PM and starts operating again at 8:00 AM the next day.
From the close of day on Tuesday to the start of business on Wednesday, no company could upload any new notification to the exchange. In the space of 16 hours, someone at the company realized that a mistake had been made. Treet had earned Rs 1 billion in profits, however, the number of shares taken to calculate the earnings per share had been taken to be much lower than the actual number of shares the company had outstanding.
Earnings per share is a shorthand metric that is used by companies to disclose how much profit they have earned based on the number of shares they have issued. The financial markets operate on an understanding that everything has to be relative and has to be put into context of the market as a whole. So if a company makes a profit of Rs 1 billion but has 1 billion shares, it will have an earnings per share of Rs 1. Meaning a shareholder will have made a single rupee from every share they own. Similarly if another company makes the same profit of Rs 1 billion but with 100 million shares, the earning per share will be Rs 10. The higher the earning per share the better a company is for investors.
As the PUCARS became operational at 8 AM, the announcement was made that Treet had made a mistake and had stated that its earning per share had been recorded as Rs 4.8 per share. In actuality, a typographical error had been made and the company should have stated its earning per share as Rs 2.82.
This announcement led to more questions being raised. How did the company end up making such a huge mistake? What was the error that led to the earning per share being recorded incorrectly?
The profit earned by the company was around Rs 1 billion. In both the statements, the profit stayed the same. The error was made in the shares that were considered for the calculator. The company had 371,028,800 outstanding shares. If these numbers of shares had been used, the earning per share should have been Rs 2.82. In the earlier announcement, the number of shares used seem to be around 217,816,667 shares.
So where did this figure come from and how could 154 million shares be ignored?
The reason for the mistake
It seems like the people at the finance department at Treet failed to polish up on their financial fundamentals.
One important thing to note here is that the number of shares considered in the calculation are supposed to be the average number of shares outstanding over the period of the year. This is a correction made to the formula as it will allow any additional shares being issued during the year to be taken into account. If the company had 100 shares at the start of the year and 200 shares at the end of the year, the best course of action is to take 150 shares in the calculation to make sure that an average of these two figures is considered.
This is added to make sure that the true number of shares are reflected rather than understating or overstating the number of shares.
The error that has been made here is rooted in something that happened almost two years ago.
Back in 2023, Treet had 178,721,100 outstanding shares. Between 2023 and 2024, the management decided to carry out a right share issue to the tune of 107%. This meant that for every share held, the investor was going to get 107 additional shares for which they would have to make an additional investment of Rs 13 per share in order to avail this facility. An investor holding 100 shares was going to get 107 right shares and would have to make an investment of Rs 1,391.
Once the right share had been made, the number of shares were going to jump from 178 million to 371 million. To keep things relative, the earning per share in 2023 should have used the 178 million figure and the number of shares should have increased in 2024. This is where the first error was made. In the annual report for 2024, the company should have used the 178 million figure when it was reporting its earnings per share of 2023. In the accounts of 2023, the earning per share was Rs 0.75. In the next report, the earning per share fell to Rs 0.61. This was due to the fact that the company took the revised average shares for both 2024 and 2023 which should only have been considered for 2024. The right share had not taken place by June 2023 and due to that those shares should not have increased.
A cursory view of the accounts would have allowed the finance department at the company to realize its mistake. The weighted average shares for 2024 were accurate as Treet had deposited the shares in January of 2024 which should have been weighted and then taken into consideration. The weighted average number of shares came to around 217 million.
If this mistake had been caught on earlier, the recent mistake could have been prevented. This never happened. The formula used for 2024 was copied and then used for 2025 as well. Due to this mistake, the formula took 217 million shares when the true number of 371 million shares should have been taken. The number of shares stayed the same throughout 2025 which meant that the average would have remained the same from July 2024 to June 2025.
This was not done and the same weighted average number of shares considered for 2024 were again taken for 2025. This was a compounding of two mistakes. The figure for 2023 should have stayed lower leading to higher earnings per share in 2023 as shown in the annual report of 2024. As the same number of shares were carried forward for 2025, the earning per share ended up being overstated when they had been much lower.
The error seems to be caused by a haste and lack of proofreading while preparing the accounts which ignored the basics that had changed from 2023 to 2025 and failed to take everything into account.
A representative at Treet was contacted in relation to this. The source stated that the matter was being investigated currently and the results will be shared once it has been looked into thoroughly. The source also stated that the market performance of the company before the announcement was contingent on the fact that a bonus was expected. Some of the price decrease was also due to the fact that no such entitlement was announced.
Treet’s tough spot
In terms of repercussions and consequences of this mistake, it is expected that the Securities and Exchange Commission of Pakistan (SECP) will look into this issue in order to reprimand the company that has made such a mistake. Only after an action has been taken will investors be given assurance that regulators are looking out for the investors and that anyone who makes such a costly mistake will be made to pay for it.
A contrarian view that can be stated in this case can be that well when so much money is involved, why would investors not double check what they are being presented and verify the results that are being disclosed? The answer to that is reaction time. The stock market and its trading is measured in a matter of seconds. The market reacts to any new information instantly. If people start to doubt and question the information they are being presented, they will lose out on the ability to make a profit.
The dictum at the market is “you snooze, you lose”. Be a second late in reacting to an opportunity and lose out on making money. Even the reaction of the market following the announcement shows that the share price jumped by almost 10% in less than an hour. People who would have missed out on buying at Rs 29.8 would have lost out on making a good amount of profit.
For Treet, what appears to be a mistake in calculation is sullying what should have been a moment of recovery for them. The time before their ill-fated announcement on the 30th of September was one of optimism. The company has long dominated the local steel blade market and claims a huge chunk of the market share. Due to this, it feels that it has a steady stream of revenues that it can depend upon. There have been efforts made in the past where they have tried to diversify their company profile, however, it has always made sure the blade business was its cash cow.
In its initial years, the company was providing a cheap alternative to the market which was looking towards high quality imports in order to fulfil their need. Treet identified a market gap as they were the only ones who were able to provide high quality products at a much cheaper price. Due to its high standard at a low price, barbers around the country start to rely on Treet. This was the reason which led to the success of Treet as the company expanded its production footprint.
Recently, the company has faced some challenging times. There has been a trend for men to grow beards and to shun the blade in the name of fashion. The impact of this can be seen on the sales volume of Treet as it has seen its sales shrink in response to this. So what did Treet do to counter this trend? They started to go from low margin, high volume strategy towards high margin, low volume one. This meant that as their sales started to decrease, Treet was able to charge a higher price leading to higher profits being earned per unit.
This fact can be seen in the fact that in 2010 the gross margins had fallen to 18% which have consistently been above 30% since 2019. WIth similar costs, Treet is charging a higher price for its product which is leading to higher gross margins. In conjunction with this, production for the company has steadily decreased from 2 billion blades in 2021 to 1.7 billion blades in 2023.
In the same period, the revenues of the company went from Rs 7.5 billion in 2021 to Rs 11 billion in 2024. Even with a decrease in production of 30%, revenues actually increased by 46%. Based on the growing revenues, it was expected that the same trajectory would continue and Treet would see better revenues in 2025 as well.
Another reason for optimism around the company and its results was higher administrative and marketing expenses due to inflation in the country. These costs were compounded by interest rate expenses which were increasing as interest rates were increasing in 2023 and 2024. June 2024 saw the highest interest rates in the country in the history of 22%.
The impact of these costs was that operating margin fell from 14% in 2023 to 8% in 2024 while net margin went from 1.3% in 2023 to -1.7% in 2024. The net margin in 2023 was already on the downward trend as it was 11.6% in 2022. This constant decrease was caused by finance cost which was 10% of sales in 2022 increasing to almost 15% in 2023 and to 17% of sales in 2024. Since June 2024, the interest rates halved from 22% to 11% by June of 2025.
As it was expected that a major chunk of finance cost was going to decrease, it was expected that the company would be able to announce better results for the year 2025. This was clearly the case because the problem was never the profit they had made. While the mistake regarding the earnings per share was admitted within 24 hours, the damage was very much already done.
