Social Media Storm Over a Turkish Stock Costs Jobs at Broker

(Bloomberg) -- The year's hottest Turkish small-cap stock has just tumbled about 40% in five days, sparking anger among retail investors who have seen their bets on the share turn sour. Two brokerage executives have paid an even higher price, losing their jobs after discussing the stock in an online video they said was intended to calm the storm.

At the peak of its meteoric ascent, Covid-19 diagnostic kit maker RTA Laboratories climbed 2,400% in a little more than two months. The company achieved a market value of as much as 1.96 billion lira ($280 million) on May 13, compared with 2019 profit of about $650,000.

The recent change in fortunes caused a flood of complaints on Twitter, Instagram and Facebook, largely from Turks who bought too late to benefit from the surge in the stock and were now watching the price slide. The outcry prompted two senior figures at Istanbul brokerage A1 Capital, which is 43% owned by RTA Laboratories, to post their hour-long video.

In their weekend presentation, Belgin Mavis, the firm's deputy chief executive officer, and Guven Akat, its corporate finance manager, praised RTA Laboratories as a company, but said the valuation it had soared to had quickly placed the biotech on a par with larger companies such as major banks. Investors who bought the stock as it climbed should have kept in mind how far it had already risen, they said. Both Mavis and Akat have lost their jobs, A1 Capital said in an exchange filing Monday.

Turkish Brokerage Fires Two After Their Comments on RTA Shares

“They shouldn't have commented about group companies,” Murat Guler, who is chairman of both RTA and A1 Capital, said by phone. The video was unethical and was posted without the knowledge of management, he said. “Investors shouldn't heed anything but exchange filings.” He didn't comment on the share's performance.

The links between the two companies go back several years. RTA, originally a distributor of animal health products, hired A1 Capital for an initial public offering that took place in May 2014. Guler Yatirim Holding, the parent of A1, purchased RTA shares in 2018 and gained control of the company. In the same year, RTA purchased the 43% stake in A1. The brokerage doesn't have an investor recommendation on RTA.

Kit Sales

Mavis, a Turkish capital markets veteran with some three decades of experience in the industry, said the weekend video discussion had proved to be a misguided effort to communicate with investors. She said the unauthorized message was intended as a response to a “concerted push” to batter the company and its executives. “We ourselves requested to be dismissed, to protect the firm,” she said by phone.

Akat wouldn't comment, when contacted by phone.

In a filing on May 27, RTA said sales of coronavirus-related kits by the company and unlisted affiliate A1 Yasam Bilimleri have reached almost 46 million liras. On April 30, it said it had won an order for 2 million testing kits. The stock gained 2.8% in Istanbul Monday, snapping five days of losses.

RTA reported first-quarter profit of 8.97 million liras late Monday, up almost five-fold from the same period a year earlier. Revenue was 22.9 million liras, up from 5.58 million liras.

Ibrahim Topaloglu, a barber from Istanbul, is among those expressing their anger over the volatility in RTA's share price. Topaloglu, who started buying the shares in late March, said he feels responsible for encouraging others to purchase the stock, at levels that turned out to be near the record high.