Halal stock screening clarification

Investment Questions and Chats Stocks
#1

As Salaam u Alaykum,

How do you define cash in the company if a company is the recipient of a number of government grants. The grants are payable in instalments upon criteria being met by the business over a number of years. The total value of the grants seems to be more than the total assets shown on the last year end financial statement, however I’m assuming that because the grants are paid in instalments we don’t count the total value of the grant when working out how much cash is in the company. Is my assumption correct?

Secondly, if the same company is not yet profitable and is financing its business through issuing shares and government grants, would we calculate the percentage of haram revenue as a percentage of the income from grants and share issues?

Thanks

Mubashir

New Tech company SNOWFLAKE IPO coming soon, is it halal
Screening, quarterly or annually?
#2

Wasalam

May Allah bless you.

Can you just clarify: by government grant do you mean a repayable loan to the government?

#3

Hi,

The grants are listed as “non repayable contributions” on the notes of the company’s financial statements.

Thanks

#4

  1. If the grants are non repayable interest-free contributions then a company’s cash will be the cash that it has currently and not what it is expected to receive. So when working out the total asset of the company you will take into consideration the total amount of cash the company holds. @Mohsin_from_IFG can correct me on that if needed.

  2. The percentage of haram revenue should not exceed 5% of the total gross revenue of the company and not the net profit.

And Allah knows best!

#5

Yes from my perspective I’d only be looking at the cash that is in a company, not what it is expected to receive. Accounting principles dictate that there can’t be more cash than total assets, as cash forms part of the assets.

#6

Thanks for your responses. They have been helpful.

May Allah reward you for your services.

1 Like
#7

Salam everyone,

There is a lot of BUZZ around this company https://www.snowflake.com/, investers are so excited for the IPO, since its a tech company will buying shares in this company be halal.

Would like some input please.

JAK

#8

Wasalam

May Allah bless you.
The business products seem halal. But I cannot say if it is halal to invest in it. Usually there is a need to do additional screening on how the company will be earning their income etc. See the link below:

And Allah know best!

#9

Salam somewhat familiar with Snowflake’s products - one of their products is a data warehouse on the cloud (appealing to startups and companies who are trying to migrate to cloud). They have gained a lot of traction within the last 2-3 years within the startup eco.

Mufti Faraz can validate if it’s halal but from my understanding it’s all data and software infrastructure.

#10

Salam,

I have two hypothetical questions that will help me understand the limit of “helping someone in sin” and at what point I am questioned about that.

  1. If I have a store that I rented but I wasn’t told what he’ll do with the store, then I found out that he’s using it to sell/store alcohol. Am I obliged to cancel the contract? and what if the contract was for 5-10 years and I can’t cancel the contract or it will cause complications? I am forced to ask the client what he’ll do with the store to ensure its halal? and what if it was mixed (like Tesco renting my store)

  2. If I own a money processing company (like Mastercard/Visa) and a client that sells alcohol or, for example, Tesco, (which sells prohibited stuff too) or even halal supermarkets that sell cigarettes, asked me to give them my service. Is it haram to give it to them (the card payment machine for money processing)?

  3. If I was the CEO of a money processing company like Visa or Mastercard, yet I am not the owner, so I am obliged to allow the service to be given to everyone to maximise profits, does that means its haram for me to be the CEO of that company? Also, as the CEO of a western company (and probably eastern too) I might need to raise loan at the lowest interest rate which probably won’t be an Islamic bank and when I become the CEO there might be already interest-bearing debt that the company already took and it might not be the smartest (commercial wise) to repay the loan due to small interest payments. So in conclusion, my job may include haram elements to maximise profits for shareholders. Does that mean it’s haram for me to be a CEO in a western country?

Thanks In advance,
Muhab Hasan

Should I monitor funds before investing?
#11

@Mufti_Billal @Mufti_Faraz_Adam

I would love to hear your responses, this is very important to me.

#12

Salam Mufti sahab,

When we screen stocks, should we do it on an annual basis or quarterly basis. I guess, quarterly is better, but its hard to keep screening stocks every quarter. Whats your opinion on this?

Best,
Furqan

#13

Assalamoalykum,
I am finding difficulty in assessing companies that are mostly R&D and are relatively loss making like certain healthcare/pharmaceutical or Technology companies. While assessing the revenue, their financial non operating mostly interest paying revenue is always dominant and therefore these companies do not comply with screening platforms like Zoya.
In view of their halal core business and excellent prospects, I need opinion from the experts regarding the permissibility.
A typical example of a such company is Moderna “MRNA” a vaccine making US Company. In fact, there are plenty of such good companies in health and technology sectors.

JazakAllah