SEC weighs changes in bidding for setting indicative price

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Mohammad Mufazzal
The securities regulator is going to increase participation of eligible institutional investors in the bidding process for setting the indicative price of a share under the Book Building (BB) method so that a reasonable market price can be fixed commensurate with the company fundamentals.
The Securities and Exchange Commission (SEC) move follows two recent cases, in which the indicative prices of two companies were not consistent with the company fundamentals due to participation of a small number of eligible investors in the bidding process.
The institutional investors then quoted high prices for shares of the two companies, which were questioned by investors as well as analysts.
At that time analysts including former secretary and also ex-SEC chairman Faruq Ahmad Siddiqi said the indicative prices of the companies did not match their fundamentals. Former finance advisor Mirza AB Azizul Islam also echoed the same view.
SEC Chairman Zia-ul Haq Khandakar said the regulator would give its decision on the price discovery or book building process very soon.
"We'll bring changes in the process in the interest of the capital market. Our decision regarding the changes will be given as early as possible," he told the FE.
An SEC member said the capital market regulator was thinking of ensuring participation of all eligible investors in the bidding for setting the indicative share price of a company, to be offloaded under the BB method.
"The SEC thinks during bidding the company concerned should invite all eligible investors. If it's not possible to invite all eligible investors, then the company should take quotations from at least 15 eligible investors," the member said.