The securities regulator has made the use of the 'book building' method mandatory for the companies willing to offer their primary shares at a premium, officials said Monday.
The 'book building' method had triggered controversy because of its alleged manipulation by section of companies and institutional investors during the latest stock bubble.
Only the companies interested to offer their stocks at face value will be allowed to float initial public offerings (IPOs) under the fixed price method, according to the latest amendments to public issue rules.
The Bangladesh Securities and Exchange Commission (BSEC) Monday approved a set of revised public issue rules with a view to ensuring more accountability and responsibilities on the part of issuing companies, issue managers, auditors and other stakeholders.
The regulator has also increased the number of disclosures and due diligence requirements for the issuing companies and issue managers.
The approval of the amendments to public issue rules came at a Commission meeting held at the BSEC's office Monday.
"As per the revised rules, the companies will have to disclose more information. The additional level of disclosures will help investors take investment decisions," said a BSEC official preferring anonymity.
He said the revised public issue rules are likely to be published within next three to four days soliciting public opinion.
"We hope that the gazette notification on the revised rules will be published by December 28 this year," the official said.
As per the revised rules, the minimum paid-up capital of an aspirant company must be Tk 150 million and its post-IPO capital must be Tk 300 million to go public under the fixed price or book building method as well.
"A company having a paid-up capital of Tk 150 million must raise fund worth at least Tk 150 million through IPO," the BSEC official said.
Under the book building method, institutional investors, including foreign ones, will be able to purchase 70 per cent shares of a company willing to go public. And general investors will apply for the remaining 30 per cent shares.
The securities will be offered to general public for subscription at an issue price to be fixed at 10 per cent discount from the cut-off price.
When the book building method was first introduced, a minimum of 5 institutional investors were required to support the price indicated by an issuing company. But after the collapse of the market in December 2010, the number was raised to 15.
As per revised public issue rules, the number of categories of the eligible investors having business operation/investment in Bangladesh was raised to 12 from previous five categories.
The eligible investors are: Merchant Bankers and Portfolio Managers, Asset Management Companies, Mutual Funds, Stock Dealers, Banks, Financial Institutions, Insurance Companies, Alternative Investment Fund Managers, Alternative Investment Funds, Foreign Portfolios Investors, Recognised Pension Funds and Provident Funds and other institutions as approved by the commission.
The use the book building method was kept suspended for more than a year following instruction from higher authorities. When the suspension was lifted, the United Power offered its stocks under the method. On Monday, the Commission also allowed another company, the Acme Laboratory to offer stocks under the same method.
According to the latest amendments to the fixed price method, institutional investors, including the foreign ones, will be eligible to buy 50 per cent shares of a company whereas the remaining 50 per cent shares will be offered to general investors.
Earlier, there was no quota for foreign institutional investors in the IPOs under the fixed price method.
The issue managers employed for managing an IPO will have to preserve its documents on company visit and other relevant matters.
The companies will have to publish its IPO prospectus in its own website on the day of submitting the same to the securities regulator.
The securities regulator has incorporated the provision of mandatory audit of financial statements of the companies willing to go public by any of BSEC auditors' panel.
On July 16 last, the securities regulator approved a 36-member panel of auditors for the listed companies. The issue manager employed for IPO management, from now on, will have to mention in the IPO prospectuses, submitted to the BSEC for approval, the names of at least five listed companies it had managed previously.
The BSEC official said, the investors will also be able to know what type of companies were managed by an issue manager if they review the issue prices, opening market prices, dividend records and present market prices of some companies managed by that issue manager.
The regulator has also incorporated a provision of issue managers' involvement with proper utilisation of IPO funds.
As per another provision of public issue rules, the companies willing to go public will have to disclose the history of their changing capital structure.
© 2024 - All Rights with The Financial Express
