Titas, the state-owned gas distribution company, is facing an uphill task in offloading the rest of its shares in nine remaining trading days as required under direct listing regulations.
A company seeking to go for direct listing has to offload 10 per cent shares of its paid-up capital within 30 trading days from its debut trading day.
Since July 2, the debut trading day, Titas has so far sold 651700 shares out of the designated 8.5 million shares in 21 days. But its trading was suspended on the third session to allow settlement of shares sold in the first two days.
In the remaining trading days, it will have to offload 7.8 million shares, meaning it requires to sell more than 0.87 million shares a day, which looks difficult. The Petrobangla, the parent company of Titas has, according to sources, has sought intervention of the energy ministry to bail the Titas out of the trouble. But, experts said, the ministry can do nothing on this issue.
The slow process in offloading stocks has also raised the questions about the effective functioning of the direct listing regulations.
"It will be a bad precedence if the company fails to sell the remaining shares in stipulated period," said Salahuddin Ahmed Khan, chief executive officer of the Dhaka Stock Exchange.
On failure to comply with regulations, he said: "The securities regulator will take action against the company in line with the securities rules."
Mansur Alam, member of the Securities and Exchange Commission (SEC) said, "Failure in offloading stocks is a clear violation of regulations. If Titas fails, the commission will ask it to explain reason within a timeframe set in direct listing regulations."
"But, there is still some time. So, let's see what happens," he added.
He, however, could not say what legal measures will be taken against Titas if it is unable to sell the remaining stocks by the deadline that expires August 13.
Capital market analyst Yawer Sayeed said: "This is the result of a malfunction of the price discovery mechanism as the selling procedure fell flat."
"Pricing method in direct listing is imperfect and it should be reviewed for the interest of the capital market as well as the investors. The regulations should be defined better to avert any price distortion," he added.
He pointed out that the other state-owned enterprises (SoEs), which intend to go public, might feel discouraged to enter the capital market if Titas fails to get fair price under direct listing regulations.
The DSE has already proposed the SEC to bring changes in the existing direct listing regulations.
Titas failed to sell any share on its debut trading day as it ignored the best prices offered by the investors. This was the first such incident in the history of the market.
As per regulations, the investors in the first ten minutes on the debut trading day made the buying offer at Tk 360.25 as the highest price and Tk 349.00 as the lowest price after the price building period against the face value of Tk 100 a share.
But instead of selling shares at the best-offered prices, the selling agent ICB Securities Trading Co. Limited offered a price of Tk 750 a share.
The Titas Gas and Distribution Company Ltd is still getting lukewarm response from the investors as shareholders remain very cautious in buying shares of the SoEs.
"The pace of offloading is very slow because the investors have bitter experience about two state-owned oil companies," one market analyst said.
A number of investors became loser after buying shares of the Jamuna Oil Company and the Meghna Petroleum at higher prices on the companies' debut at the bourses under the direct listing regulations.
Each share of Jamuna, which made its debut on January 9 this year with a face value of Tk 10 only, jumped by 95 times, while each share of Meghna, trading of which started on January 14 with a face value of Tk 10, shot up by 35 times on the first day.
Titas Gas is the fifth state-run company listed on the stock exchanges under the direct listing regulations.
On Thursday last, the closing price of Titas share was Tk 301.75 at the DSE.
Titas in trouble with huge unsold shares
Kayes M Sohel | Published: August 02, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
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