The stock market regulator BSEC approved on Tuesday public issue rules, raising the lock-in period for placement shares to two years from one year earlier.
The approval came at a meeting held at the Bangladesh Securities and Exchange Commission office in Dhaka.
A lock-in period is a predetermined amount of time after an initial public offering (IPO), during which large stakeholders are restricted from selling their shares.
On the other hand, placement shares denote pre-IPO capital raising.
The securities regulator brought a number of changes to the public issue rules 2015.
According to the new public issue rules, the lock-in period will be counted from the date of commencement of trading, instead of the prospectus issue date.
For sponsor-directors and those holding 10 per cent or more shares, the lock-in period will three years as before, but the period will be counted from the date of commencement of trading, instead of the prospectus issue date.
The lock-in period for placement shareholders and alternative investment funds will be two years.
Eligible investors will have to keep a certain amount of investment in the secondary market in order to enjoy quota advantages in an IPO lottery, according to the new public issue rules.
The BSEC will set the amount in the consent letter of every IPO. If an eligible investor does not have that particular amount of investment in the secondary market, he will lose the IPO quota facility.
Under the public issue rules, the quota for eligible investors has been cut to 30 per cent from the existing 40 per cent.
The general investors' quota (excluding non-resident Bangladeshis) has been enhanced to 50 per cent from 40 per cent under the fixed-price IPO method.
Under the book building method, eligible investors' quota has also been brought down to 50 per cent from 60 per cent and the general investors' quota (excluding NRBs) raised to 40 per cent from 30 per cent.
When a company raises funds at the face value, it does it under the fixed-price method. On the other hand, the company wants premium over the face value, it does it under the book building method.
In case of a fixed-price method, issuers will have to raise at least Tk 300 million or 10 per cent of the paid-up capital, or whichever is higher, according to the new rules.
The issuers will have to raise at least Tk 750 million or 10 per cent of the paid-up capital, or whichever is higher, if companies go for it under the book-building method.
During the bidding under the book building method, the bidder's name and the quoting price will not be displayed. The bidders will get shares at their bidding price and the amount demanded.
The bidder must buy the amount of shares at the quoted price.
The securities regulator also abolished the condition of positive net operating cash flow for one year under the fixed price method.
The new rules will require a company to utilise 80 per cent of the pre-IPO paid-up capital before applying for a public issue.
The BSEC at the meeting also decided to abolish providing re-investment unit as dividend for the mutual funds. No mutual funds (closed-end and open-end) can declare stock dividends except cash.
The close-end and open-end mutual funds can declare cash dividend from now on.
The rules also stipulate that the stock exchanges will have to send observations to the regulator, if any, within 30 days after receiving the listing application from the issuer.
babulfexpress@gmail.com