SEC preparing revised formula on IPO

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Mohammad Mufazzal
The Securities and Exchange Commission (SEC) is now preparing a formula on IPO (initial public offering) floatation in the backdrop of Finance Minister AMA Muhith's assurance to review a decision taken earlier by his ministry.
The SEC is likely to place the revised formula to the finance ministry sometime this week.
"This week we will go to the finance ministry for approval of our proposal on IPO floatation," SEC member Yeasin Ali told the FE.
"The government wanted to know what could be done in accordance with its previous decision on IPO floatation, which would be acceptable both to the ministry as well as to the companies," sources said.
The move has been taken following widespread criticism of the government's recent decision to make the floatation of minimum shares, equivalent to 40 per cent of the paid-up capital of a company mandatory.
After the previous decision, analysts, issue managers and several companies, willing to float their shares, said the government's decision would close the window for fresh shares, and thus give a chance to manipulate the market when the shares of poor-performing companies would be overvalued.
The finance minister on December 23 said the government would review its previous decision, and asked the SEC to place its proposal.
"The SEC can propose that a company must offload its shares, which is equivalent to minimum 10 per cent of its total paid-up capital but not less than Tk ten million," AB Mirza Md Azizul Islam, former SEC chairman as well as former finance adviser, told the FE.
"The maximum amount of offloading shares can be above 10 per cent, which will depend on the company," he added.
"At present the market needs good quality shares. So the floatation of 10 per cent shares of the paid-up capital is enough for capitalisation of a good company," Dr Ahsan Mansur, executive director of Policy Research Institute, told the FE.
"The company owners must show their own good capital base for further expansion. Otherwise, the risk of manipulating the market by offloading shares of the poor-performing companies cannot be avoided," he added.