Inquiry regarding a transaction in commercial stocks.

The questioner : It is possible that there is an initial public offering, meaning they have launched a listing for a company that actually currently exists, and it wants to increase its capital, so it went to the market with an offering of one million pounds. So, for its expansion, Professor, they might issue a nominal number, for example, two, three, or four dinars, while its true value is six dinars.

The Shaykh : I did not understand this. How is it two dinars, for example?

The questioner : I mean, Professor, these are public joint-stock companies.

The Shaykh : Excuse me, my brother, I understood everything you said, but stop at the last point and clarify it for us.

The questioner : I mean, when they want to offer two to eight million, an additional two million in the form of shares, where each share has a nominal value, which they set at two dinars, but its true value in the market is six dinars.

The Shaykh : How? Clarify for us how its value in the market is six dinars while its reality is two dinars. How is that?

The questioner : Professor, for example, in a public company, when it wants to increase its capital, this is an example...

The Shaykh : May Allah guide you, Thamer. You are repeating the previous speech, and we understood all of it. It is only this point alone that we do not grasp, and we are excused for not understanding it because we are not traders and we are not in this battle. We ask Allah to protect us from it. Just clarify for us what it means that it is two dinars in the market, six dinars, and its reality is two. How is this?

The questioner : The capital, Professor, when the buyers started at six dinars, and when they raised their capital, the state set the nominal value of this share at two dinars... and they can sell it in the market.

The Shaykh : Be patient. May Allah guide you. Be patient, Shaykh Ali. May Allah guide you. Do not spoil our thinking. I swear to Allah, I did not understand this. Give us your support, Abu Yahya.
Abu Yahya: ... is added to the old dinar...

The Shaykh : I mean, the old share and the new share become equal.

The questioner : I mean, they become with the same privileges, but the old share has reserves that should have been distributed but were not, so the new share takes this path.

The Shaykh : So, the new share gets a right to the surplus from the old shares.
Abu Yahya: Yes, but its nominal value remains at the original value. I mean, if it was a share of one dinar and he bought... and now the price of the share... is five dinars, he buys the share for five dinars, but it is recorded for him as one dinar in share value.

The Shaykh : I mean, in order to equalize with the old partners. Well, here a question arises: how did you determine it as five, not six, for example, or less?

The questioner : ... it has a formula based on profit operations, equal to the expected, meaning an estimated value. So I do not say that what is traded in the market is correct, so it is often...

The Shaykh : May Allah have mercy on you. Excuse me, what is consistent with the market value?
Abu Yahya: ... it is often close to the market price...

Another questioner : A month ago, shares were offered. The value of the share sold by the administration, the administration of the Bank of Jordan, in agreement with the government, was ten dinars, and its value with tax was thirteen dinars. It was sold in the Amman Stock Exchange for twenty-two dinars. So there was a big difference from thirteen dinars to twenty-three dinars. So, in order not to wrong the rights of the old shareholders, they gave priority in buying the shares offered to increase the capital. The government gave the old shareholders the priority of purchase.

The Shaykh : The old shareholders.

The questioner : Yes, just like the example we gave for this. Of course, all of this is not reasonable, and it is riba, and dealing in it is not permissible. And we give an example of a company in a contrary manner, different from this issue. A company offered new shares at a time when the market price of the share was seventy qirsh. It offered the share for subscription and adjusted its nominal value to one dinar, while its price in the market was seventy qirsh. So it doubled the capital. Here, it did not give priority to the old shareholders.

The Shaykh : Yes, exactly.

The questioner : You want to eat the new shareholder. You want to deceive him.

The Shaykh : Well, what caused the first difference?

The questioner : The first cause is the public's rush to buy shares. I do not mean the public as people who understand and those who do not understand; I mean those who understand and those who control the market. They want to raise it so that the value remains high, as if there is something in the country. Some of the speculators control the market; they raise it and lower it, and they are the beneficiaries as a result. So, it is promoted to the poor citizen, for example, one who came from the Gulf, or one who does not know the matters of his religion, or one who has a little money. He enters the market and goes into a labyrinth and becomes a fat prey for them. And this is what happens, and I hope we will hear the answer.

The Shaykh : It is similar to countries like America, which raise the value of their currency at times and lower it at others. I say this is like the major countries, which raise their currency at times and lower it at others for their benefit, of course not for the benefit of other peoples. So, as we said during our previous speech, this is a form of gambling under the name of a type of transaction or company or the like. And Allah is the Helper. Other than that, I think it is time for the Zuhr prayer, so let us prepare for the prayer, if Allah wills...