DSE won't allow non-govt PLCs for direct listing

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Kayes M Sohel
Dhaka Stock Exchange (DSE) will not allow any non-government public limited company (PLC) to go under the direct listing regulations.
The recent bitter experience regarding the regulations that dismayed the investors and the market has prompted the DSE to take such a decision.
Analysts say fund raised by the company under the regulations does not bring any good for the company or the country's economy other than benefiting the shareholders.
"The existing system misguides the investors who get their fingers burnt in the end," said DSE president Rakibur Rahman after bourse's board meeting Tuesday.
"If the companies want to go public, they have to choose other available price discovery methods like book building and IPO," he added.
Under the existing system the investors remain in dark about the company's financial strength, causing confusion, Rahman said.
The decision will be sent to the Securities and Exchange Commission (SEC) for approval.
Since 2006, the year when the direct listing regulation was introduced, eight companies, which took the advantage, experienced abnormal share-price fluctuation on their debut day. Of the eight companies, five are state-owned companies and three private companies.
"The move taken by DSE is good for the market," said Akter H Sannamat, managing director of the Prime Finance and Investment Ltd. "Such a step should have been taken earlier. However, it is better late than never," he added.
He also said the direct listing regulation is a flawed one and it should be banned for ever.
Earlier, the SEC issued an order to make amendment to the direct listing regulations to protect the investors' interest.
The amendment will help prevent any such price fluctuation in future, an official of the SEC said.
According to the SEC order, the price discovery method will be executed under book-building system.
As per the SEC order, the existing shareholders should offer for sale at least 10 per cent of the shareholdings of a company within 30 trading days from the date of commencing normal trading.
Ten per cent of the 25 per cent shareholdings should be allocated or distributed to the eligible institutional bidders following the procedures prescribed for determining price under the book building method, and the balance quantity will be available for general investors through the normal trading system of the stock exchanges.
There should be a lock-in period of 15 trading days from the debut day for a security issued to the eligible institutional investors under the book building method, the order says.
The existing shareholders including sponsors and directors shall be restricted from buying the company's share until complete disposal of the targeted 25 per cent shareholdings, it added.
A broker selling shares on behalf of existing shareholders should disclose through the stock exchanges the total number of shares sold everyday along with the cumulative quantity sold and the quantity of unsold shares until completion of sale of the targeted 25 per cent shareholdings.
The normal trade for general investors will begin two days after completing transfer of the shares allocated to the eligible bidders, according to the order.
Under the existing direct listing regulations, on August 30 last Navana CNG, a leading gas refilling provider, made debut and gained 1710 per cent on its face value to close at Tk 193.90 per share.
Titas Gas failed to sell any single share on debut trading on July 6 last year, drawing sharp criticism from different stakeholders.
The share price of Jamuna Oil surged to Tk 952 against the face value of Tk 10 only on the debut day of the issue on January 9 last but it abruptly dipped below Tk 350 in the subsequent days.
Titas Gas Distribution and Transmission Company, Dhaka Electricity Supply Company (DESCO), Power Grid Company of Bangladesh (PGCB), Jamuna Oil Company, Meghna Petroleum, ACI Formulations and Shinepukur Ceramics have made debut in the country's stock markets under the existing direct listing regulations since June 18, 2006.
On February 23, 2006, the commission approved the direct listing regulations for the bourses to encourage the local and multinational profit-making companies to raise fund from the capital market.